TABLE OF CONTENTS · ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters,...

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Oncobiologics, Inc. Annual Report 2017 Form 10-K (NASDAQ:ONS) Published: December 29th, 2017 PDF generated by stocklight.com

Transcript of TABLE OF CONTENTS · ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters,...

Page 1: TABLE OF CONTENTS · ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities ITEM 6. Selected Financial Data ITEM 7.

Oncobiologics, Inc. Annual Report 2017

Form 10-K (NASDAQ:ONS)

Published: December 29th, 2017

PDF generated by stocklight.com

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ITEM 1. BusinessITEM 1A. Risk FactorsITEM 1B. Unresolved Staff CommentsITEM 2. PropertiesITEM 3. Legal ProceedingsITEM 4. Mine Safety Disclosures

ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and IssuerPurchases of Equity Securities

ITEM 6. Selected Financial DataITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of

OperationsITEM 7A. Quantitative and Qualitative Disclosures about Market RiskITEM 8. Consolidated Financial Statements and Supplementary DataITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial

DisclosureITEM 9A. Controls and ProceduresITEM 9B. Other Information

ITEM 10. Directors, Executive Officers and Corporate GovernanceITEM 11. Executive CompensationITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related

Stockholder MattersITEM 13. Certain Relationships and Related Transactions, and Director IndependenceITEM 14. Principal Accounting Fees and Services

ITEM 15. Exhibits and Financial Statement SchedulesITEM 16. Form 10-K Summary

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ONCOBIOLOGICS, INC. ANNUAL REPORT ON FORM 10-K

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Cautionary Note Regarding Forward-Looking Statements and Industry Data ii

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PART II

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PART III124124

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PART IV124128

Signatures 129

In this report, unless otherwise stated or as the context otherwise requires, references to “Oncobiologics,”“the Company,” “we,” “us,” “our” and similar references refer to Oncobiologics, Inc. The Oncobiologicslogo and other trademarks or service marks of Oncobiologics, Inc. appearing in this report are theproperty of Oncobiologics, Inc. This report also contains registered marks, trademarks and trade namesof other companies. All other trademarks, registered marks and trade names appearing in this report arethe property of their respective holders.

Convenience translations between Swiss Francs, or CHF, and U.S. dollars provided herein are based onthe noon buying rate in New York City for cable transfers in foreign currencies as certified for customspurposes by the Federal Reserve Bank of New York on September 29, 2017, or CHF 0.9688 = $1.00. Wedo not represent that CHF were, could have been, or could be, converted into U.S. dollars at such rate orat any other rate.

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS AND INDUSTRY DATA

This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27Aof the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, asamended. Forward-looking statements are based on our management’s beliefs and assumptions and oninformation currently available to our management. All statements other than statements of historical factsare “forward-looking statements” for purposes of these provisions, including those relating to future eventsor our future financial performance and financial guidance. In some cases, you can identify forward-looking statements by terminology such as “may,” “might,” “will,” “should,” “expect,” “plan,” “anticipate,”“project,” “believe,” “estimate,” “predict,” “potential,” “intend” or “continue,” the negative of terms like theseor other comparable terminology, and other words or terms of similar meaning in connection with anydiscussion of future operating or financial performance. These statements are only predictions. Allforward-looking statements included in this Annual Report on Form 10-K are based on informationavailable to us on the date hereof, and we assume no obligation to update any such forward-lookingstatements. Any or all of our forward-looking statements in this document may turn out to be wrong.Actual events or results may differ materially. Our forward-looking statements can be affected byinaccurate assumptions we might make or by known or unknown risks, uncertainties and other factors.We discuss many of these risks, uncertainties and other factors in this Annual Report on Form 10-K ingreater detail under the heading “Item 1A — Risk Factors.” We caution investors that our business andfinancial performance are subject to substantial risks and uncertainties.

This Annual Report on Form 10-K also contains estimates, projections and other information concerningour industry, our business, and the markets for certain diseases, including data regarding the estimatedsize of those markets, and the incidence and prevalence of certain medical conditions. Information that isbased on estimates, forecasts, projections, market research or similar methodologies is inherently subjectto uncertainties and actual events or circumstances may differ materially from events and circumstancesreflected in this information. Unless otherwise expressly stated, we obtained this industry, business,market and other data from reports, research surveys, studies and similar data prepared by marketresearch firms and other third parties, industry, medical and general publications, government data andsimilar sources.

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PART I

Item 1. Business

Overview

We are a clinical-stage biopharmaceutical company focused on identifying, developing, manufacturingand commercializing complex biosimilar therapeutics. Our current focus is on technically challenging andcommercially attractive monoclonal antibodies, or mAbs, in the disease areas of immunology andoncology. A mAb is a type of protein that is produced by a single clone of cells or cell line and made tobind to a specific substance in the body. Our strategy is to cost-effectively develop these biosimilars on anaccelerated timeline, which is fundamental to our success and we believe positions us to be a leadingbiosimilar company. We have leveraged our team’s biopharmaceutical expertise to establish fullyintegrated in-house development and manufacturing capabilities, which we refer to as our BioSymphonyPlatform. We believe this platform addresses the numerous complex technical and regulatory challengesin developing and commercializing mAb biosimilars and was designed to provide significant pricingflexibility. We have identified a pipeline of biosimilar product candidates for further development and haveadvanced two of these product candidates through Phase 1 clinical trials and into preparations forPhase 3 clinical trials: ONS-3010, a biosimilar to adalimumab (Humira ), and ONS-1045, a biosimilar tobevacizumab (Avastin ).

We were founded by a team of industry veterans with decades of cumulative experience in thedevelopment and commercialization of biologics products, or biologics. Our leadership team has beeninstrumental in obtaining global regulatory approval for multiple complex biologics at leading multinationalbiopharmaceutical companies. In addition, our scientific team has specific experience in processdevelopment for complex biologics, protein manufacturing and analytical research and development,which are essential components for the development and manufacturing of complex biosimilars.

Escalating healthcare costs and healthcare reform have been major drivers for the advancement of thebiosimilar market as payors continue to seek ways to reduce costs. By gaining the “highly similar”regulatory designation for an approved biologic, or reference product, less-expensive biosimilars providethe opportunity to reduce treatment costs without sacrificing the quality of care. We believe the significantpricing flexibility provided by our BioSymphony Platform gives us an additional competitive advantage inpotentially capturing market share. The loss of multiple reference product patent exclusivities in thecoming years will create significant opportunities for the biosimilar industry. There are more than 30reference products facing loss of patent exclusivity in one or more major markets through 2020. Accordingto the SNS Report entitled “The Biosimilar Drugs Market: 2015-2030 Opportunities, Challenges,Strategies & Forecasts”, mAbs are the largest segment of the biologic market, and worldwide sales ofmAb biosimilars are expected to grow from approximately $1.4 billion in 2015 to $56.5 billion by 2030.

Our most advanced product candidate, ONS-3010, an adalimumab (Humira) biosimilar, targets the tumornecrosis factor alpha, or TNFα, which is a potent inflammation mediator. In the first quarter of 2015, ONS-3010 met its primary and secondary endpoints in a Phase 1 clinical trial. In addition, ONS-3010demonstrated a lower rate of injection site reactions than that of Humira. Our second product candidate,ONS-1045, a bevacizumab (Avastin) biosimilar, interferes with tumor growth by binding to vascularendothelial growth factor, or VEGF, a protein that stimulates the formation of new blood vessels. InOctober 2015, ONS-1045 met its primary and secondary endpoints in a Phase 1 clinical trial.

In addition to our clinical candidates, we have several biosimilar product candidates in development. Ourmost advanced preclinical product candidate, ONS-1050, a trastuzumab (Herceptin ) biosimilar,interferes with the human epidermal growth factor receptor 2, or HER2, a protein that stimulates cellproliferation, and when overexpressed, can cause certain cancers. ONS-4010 is a biosimilar todenosumab (Prolia / Xgeva ), which is a fully human mAb with affinity and specificity for human RANKL(receptor activator of nuclear factor kappa-B ligand), and used for the treatment of osteoporosis,treatment-induced bone loss, bone metastases and giant cell tumor of the bone. Commencement ofPhase 1 clinical trials of ONS-1050 and ONS-4010 are dependent on successful completion ofcomparative analytical and in vitro functional studies, receipt of necessary regulatory authorizations andadditional funding. In addition to these preclinical products, we plan to expand our pipeline of complexbiosimilar product candidates as additional products approach the loss of their respective patentexclusivities.

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• Maximizing our Biosymphony Model. We are augmenting our BioSymphony Platform to addcapacity and capability to provide contract services beginning in 2019 to provide developmentand bulk drug manufacturing for development stage biotechnology and biopharmaceuticalcompanies. We believe that this strategy will allow us to fund and achieve commercial readinessfor our pipeline of biosimilar product candidates.

• Rapidly advancing our lead biosimilar product candidates through late-stage clinicaldevelopment in emerging markets. We recently outlicensed the remaining emerging marketsrights to our most advanced clinical-stage product candidates, ONS-3010 and ONS-1045, andintend to rapidly commercialize these assets with our partner to begin generating revenue in2020. We believe that this strategy will accelerate the development of our biosimilar pipeline andenhance market awareness of our biosimilar product candidates when we prepare to launch indeveloped markets.

• Expanding our pipeline to include innovative mAb candidates. We plan to initiatedevelopment of an innovative mAb candidate in early 2018. We believe that this opportunity canbe exploited with a small investment and could potentially begin generating revenues in 2021.

• Advancing our pre-clinical biosimilar pipeline towards clinical development. We willcontinue to build our pipeline of early stage biosimilar product candidates for further developmentand commercialization. We believe that the long term value of our company will be driven by thelaunch of multiple biosimilar products from our pipeline.

• Seeking opportunities to maximize the value of our pre-clinical and clinical pipeline viaco-development partnerships and/or licensing the development and commercializationrights where appropriate. We currently intend to enter into strategic collaborations andpartnerships with biotechnology and pharmaceutical companies in the United States and otherregions. We believe this strategy will allow us to maximize the impact of our financial resourcesand result in increased commercial value of our development programs.

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Our Strategy

Our goal is to utilize the BioSymphony Platform to identify, develop, manufacture and commercializetechnically challenging and commercially attractive mAb biosimilars on an accelerated timeline in a cost-effective manner, initially in the disease areas of immunology and oncology. In order to achieve this goal,we have adopted a strategy to leverage the BioSymphony Platform and its capabilities to provide fundingfor our biosimilar development program while we continue to develop our pipeline. The key elements ofour strategy include:

The Biosimilar Industry

Background

Biologic products are produced by living cells and have been approved for the treatment of variousdisease states. Biosimilars are the approved “copies” of such reference products. According to theEvaluatePharma report “World Preview 2017, Outlook to 2022” from EVALUATE™ Ltd, the 2016 globalbiologics market represented approximately $202 billion in sales and the global biologics market isprojected to reach $326 billion in sales by 2022, with 52% of the top 100 product sales coming frombiologics in 2022. Additionally, according to a recent report from ESPICOM, an international healthresearch and publishing company, more than 280 potential novel biologic therapies have been identifiedin the clinical pipeline, almost half of which are being evaluated for oncology indications. Multiple patentsfor many commercially successful biologic products are expected to expire during the next five years,providing an unprecedented opportunity for reductions in the cost of biologics through the introduction ofbiosimilars. There are over 30 biologic products that face loss of market exclusivity in at least one majormarket through 2020. Biologic reference products with estimated global sales of  $100 billion will come offpatent by 2020, and between 2009 and 2019, $50.0 billion of the market value of biologics in the UnitedStates alone will lose patent protection. There are currently more than 45 mAbs on the market worldwide,with revenues in excess of $40.0 billion. The overall biosimilar market was projected to reach global salesof approximately $7.8 billion ($2.3 billion of which is associated with mAbs) during 2016, eventuallyaccounting for approximately

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$118 billion by 2030 ($56.5 billion of which is associated with mAbs). As demonstrated in the followinggraphic, revenue from global sales of mAbs was expected to account for nearly 29% of the global sales in2016, with European sales expected to account for 24%.

“The Biosimilar Drugs Market: Opportunities, Challenges, Strategies & Forecasts”; SNS Research Ltd.

A major driver for the advancement of the biosimilar market is the increasing and disproportionate amountof healthcare spending by governments and private payors on biologic therapeutics. The high costs forbiologic treatments have led to an increasing financial burden on these payors. We believe this marketdynamic has created opportunities for biosimilar developers in two key respects. First, the high costs ofbranded biologic products have created a growing demand for lower-cost biosimilars that can offerpatients the same benefits as the reference products without sacrificing quality of care. Express Scriptsprojects U.S.healthcare savings of approximately $250 billion between 2014 and 2024 if biosimilars forjust 11 existing biologic drugs that are the most likely candidates for biosimilars were to come to market.Second, because biosimilars, especially complex biosimilars, are more costly and challenging to developand manufacture than the generic versions of small-molecule drugs, we expect fewer companies will beable to successfully overcome the technical and regulatory complexities of biosimilar development.

Technical Challenges

Unlike small molecules, such as aspirin, or simple biologics, such as human growth hormone, mAbs aremuch larger and correspondingly complex. MAbs consist of four polypeptide chains of amino acids andperform a vast array of functions within living organisms. The specific amino acid sequence of each mAbdictates the folding of the protein into a specific three-dimensional structure that determines its activity.The following image compares a mAb to human growth hormone and aspirin. The complexity of amolecule increases with its size as defined by molecular weight, or number of atoms.

MAbs are derived from living cells and are produced through a series of complex processing steps thatdefine their overall structure. Accordingly, they cannot be chemically synthesized nor fully characterizedby a few analytical techniques. MAbs are also known to contain sugar side-chains, which are attachedthrough a process referred to as glycosylation. These sugar chains confer structural stability, improvesolubility, and can impact the function of the protein in vivo.

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• Reference Product: A protein therapeutic exists as a mixture of various molecular forms thattogether impart its mechanism of action. In order to understand the structure and function of thereference product, the biosimilar developer must conduct many analytical studies to reverseengineer the multiple quality attributes that govern the reference product’s protein structure andfunction. Due to the inherent variability that results from cellular production techniques, manyproduction lots of reference product must be analyzed to understand the batch to batchvariability and set the target product profile for the biosimilar candidate.

• Similarity: Biosimilar developers must create their own cell line and unique manufacturingprocess as they do not have access to the reference product manufacturer’s cell lines ormanufacturing know-how. As a result, only similar, but not exact, copies of the reference productare feasible. During production, mAbs commonly can degrade to form aggregates, when two ormore mAb units bind to each other to form larger structures. These larger structures can lead tochanges in activity, or immunogenicity (provoke an immune response). Finally, mAbs may alsoundergo other chemical degradation events during purification and during storage, each ofwhich can impact potency. Producing biomolecules that are highly similar to the referenceproduct requires a significant interdisciplinary effort that involves a number of iterative cyclesbetween cell line and process development, and analytical characterization.

• Manufacturing: The quality profile of a biologic can change when the manufacturing processscale is increased to commercial size or when processes are modified to fit a facility. The abilityto manufacture highly similar molecules must be demonstrated reproducibly at commercialscale. In order to enable pricing flexibility, the manufacturer must minimize costs related todepreciation of its capital investment, raw materials and operations, while maintaining highquality and yield.

• demonstrating to regulators that specific analytical differences of the biosimilar do not haveclinical impact;

• complying with individual regulatory authority requirements for in vivo preclinical studies toenable development and registration in planned markets;

• anticipating and responding to changes in regulatory requirements that could involve additionaltechnical work;

• demonstrating extrapolation for an indication that can drive market share;

• addressing questions during regulatory review of marketing applications to prevent a delay inapproval; and

• designing global clinical trials to meet the different regulatory requirements to avoid duplicativestudies and additional expense.

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The complexities of mAbs require a specialized skill set for development. A biosimilar developer musthave the necessary expertise in cell and molecular biology, protein biochemistry and biochemicalengineering to overcome the following particular technical challenges:

Regulatory Challenges

The regulatory requirements for the development of biosimilars in many countries, including the UnitedStates, Canada, the European Union, or EU and Japan, differ from the requirements for developing thereference products. For example, the analytical data package required to initiate clinical trials ofbiosimilars is more exhaustive due to the prerequisite to generate initial similarity data to the referenceproduct. This process requires multiple qualified methods to ensure that the data generated for similaritytesting are reproducible and comprehensive. On the other hand, the non-clinical and clinical programs forbiosimilars tend to be more streamlined than for innovator molecules if shown to be analytically similar atthe outset and can be supported by the reference product data. The regulatory expectations surroundingbiosimilars are still evolving as new draft and final guidance documents are being made public acrossregulatory authorities.

Regulatory hurdles associated with biosimilar development include:

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Any deficiency in regulatory approach could result in inconsistencies in the final data package for thesubmission and could lead to a delay or rejection of a product candidate’s approval in certain markets.

Our BioSymphony Platform

Escalating healthcare costs and healthcare reform initiatives have been major drivers for theadvancement of the biosimilar market. Our BioSymphony Platform is designed to address the technicalchallenges and regulatory dynamics of the complex biologics industry by developing high quality mAbbiosimilars on an accelerated timeline and in an efficient and cost-effective manner. The BioSymphonyPlatform, driven by our entrepreneurial culture, leverages our fully integrated in-house 48,000 square footdevelopment and manufacturing facility and our team’s clinical and regulatory expertise. We believe thismodel enables significant pricing flexibility, providing us with competitive advantages, and positions us tobe a leading biosimilar company. The key elements of our BioSymphony Platform are depicted in thefollowing figure.

MAb development presents high technical hurdles, and the success of our development efforts isdependent on an experienced and knowledgeable workforce. We were founded by a team of industryveterans with decades of cumulative experience in biologics development and commercialization. Ourteam has been instrumental in obtaining global regulatory approval for multiple complex biologics atleading multinational biopharmaceutical companies. We have hired accomplished scientists, engineersand business leaders since our inception, who together foster an entrepreneurial culture that has enabledagility, teamwork and rapid decision-making at Oncobiologics. Together, this has resulted in a highlycollaborative approach, which has been critical to the efficient and sustainable operation of ourBioSymphony Platform.

Technical Platform

In-House CMC Development Capabilities

We have established a research and development laboratory, which we believe enables the rapiddevelopment of high-quality mAb biosimilars. By establishing this infrastructure in-house, we haveshortened the typical time required to perform the mandatory interdisciplinary iterative steps to developmAb biosimilar products, which we believe reduces the cost of development. Our platform provides uswith a differentiated approach to the following compulsory steps required to develop biosimilars:

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• Reference Product Characterization and Cell Line Development: We initially reverseengineer the amino acid sequence and identify the critical quality attributes of the referenceproduct that in turn provides the criteria for the clone selection process. We utilize automatedtechnologies to enable thousands of clones to be screened in an accelerated timeline.

• Bioprocess: We utilize high-throughput mini bioreactors to assess the screened clones andmedia components to determine which clone and bioreaction process will produce a biosimilarcandidate with the closest match to the reference product. We have developed purificationtechnology, including a platform of chromatography techniques that are strategically combined tomaximize product-yield while meeting the critical quality attributes of the reference product.

• Formulation: The formulation that best preserves the stability of the biosimilar candidate maybe different than the actual formulation of the reference product. We use high-throughputtechniques to screen and evaluate many formulation variations to identify the most effectivestable formulation.

• Analytical Characterization and in vitro Similarity: We utilize numerous advanced analyticaltechniques and instruments to enable us to interpret the chemical and structural similaritybetween our biosimilar candidate and the reference product. We apply a rigorous analyticalapproach to characterize attributes such as structure (primary, secondary and tertiary), size andglycosylation, among others. We test up to approximately 60 quality attributes withapproximately 45 analytical methods. The biological characterization assays supportestablishing the in vitro similarity. Our in-house capabilities provide an expeditious and thoroughassessment of biochemical, biophysical and functional attributes.

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To pursue development and commercialization of additional mAb biosimilar candidates, we plan to build-out additional state-of-the-art development infrastructure, which we will occupy in phases as needed. Ourplan is to add to our scientific team as our development programs expand.

In-House Manufacturing Capability

We have established a state-of-the-art manufacturing facility capable of simultaneously producing multiplebiosimilar candidates. Our manufacturing platform utilizes single-use technology, including the use of thelargest single-use bioreactor available, which eliminates the need for rigorous cleaning and sterilizationprocedures, and related operational requirements necessary for manufacture in traditional stainless-steelbased facilities. We have been able to construct single-use based antibody manufacturing plants inapproximately four months as compared to the few years required for de novo biotechnologymanufacturing facilities. We have developed and execute a quality system that meets U.S. and EUstandards and have successfully completed two Qualified Person, or QP, audits resulting in cGMPdeclaration for both Phase 1 and Phase 3 manufacturing. We plan to expand the manufacturing capacityin our current location in 2018 to support our new contract development and manufacturing business andour future pipeline needs.

Development-Manufacturing Integration

We believe we have successfully and seamlessly unified our development capabilities and manufacturingprocesses to minimize time lapses and risks that are frequently encountered in drug development. Ourinternal processes eliminate the need to transfer technology and processes to third-party manufacturers.Technology transfers are commonly performed through formal procedures consisting of the transfer ofknow-how, followed by manufacturing process gap assessments, and then finally replication and scale-upof the development process at manufacturing scale. These technology-transfer proceedings can takeupwards of six months or longer, and could have an adverse effect on product quality. Our platform givesus the ability to initiate manufacturing within approximately six weeks of process development completion.

Regulatory and Clinical Approach for a Successful Global Launch

The regulatory requirements for the development of complex biosimilars are significantly different fromthose for novel biologic therapeutics. These biosimilar regulatory expectations are still evolving with newdrafts and final guidance being made public by regulatory authorities worldwide. Due to the limited number

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of biosimilar regulatory approvals and developing guidance, prior regulatory feedback may not reflect thecurrent expectations of the applicable regulatory authorities. We have developed a global regulatory riskmitigation strategy that we believe allows us to ask the right questions at the right time, enables us to askprobing questions to explore regulatory boundaries, provides the potential to set precedence and assuresalignment with regulatory authorities. We believe the key prongs to this strategy include: checking in atcertain key milestones to confirm continued acceptability, adjusting our programs with an understandingof evolving requirements, approaching key health authority agencies to discuss development plans andreviewing regulatory guidance and published information.

Our interactions with the U.S. Food and Drug Administration, or FDA, and European Medicines Agency,or EMA, provide us with a better understanding of relevant regulatory requirements and build our overallregulatory knowledge base for other upcoming product candidates. We augment these interactions bymeeting with key health authorities, selected based on known expertise with biotechnology products orthe established rapporteur to the reference product. These additional interactions are used to providenational input for risk mitigation for the clinical trial applications and also additional expert input on ourdevelopment programs. This knowledge creates efficiencies in our development program by reducing theneed to duplicate experiments or clinical trials. We have retained regulatory consultants in other countriesto obtain advice on how to approach the regulatory agencies to optimally design our global developmentplans to meet the relevant local and regional regulatory requirements.

An important aspect of our regulatory development strategy is to design our confirmatory trials tomaximize the potential commercial success in order to meet the requirements for extrapolation to otherindications and to enable us to seek an interchangeability designation for at least some of our current andfuture product candidates. Our goal is to develop trial designs that will enable us to extrapolate to allapproved indications without additional clinical data. We will also assess the ability for our productcandidates that are either self-administered or used chronically in order to seek an interchangeabilitydesignation, which allows substitution for the reference product by a pharmacist without the interventionof the healthcare provider who prescribed the reference product. We may also develop trial designs todemonstrate clinical advantages of our biosimilar product candidates over reference products.

Data from in vivo animal studies may not be required to initiate human clinical trials for biosimilars, and assuch we only conduct animal studies if it is deemed necessary to meet regulatory requirements or toaddress safety questions. Our approach to confirm that there is no clinically meaningful impact of anyobserved analytical differences is to conduct a Phase 1 clinical trial in healthy volunteers, followed by asingle Phase 3 confirmatory clinical trial in a sensitive population. Based on regulatory guidance as wellas our recent interactions with regulatory bodies, we believe this approach will continue to be acceptableto the regulatory bodies. Because regulatory bodies generally do not require a repeat of the originalefficacy and safety trials, we continue to explore the potential of novel approaches to trial design that canconfirm similarity in shorter duration of treatment and/or with smaller patient numbers, which can result inshortened timelines to registration. In certain cases, we may even be able to demonstrate that ourbiosimilar product candidates are more effective or safer than the reference products.

Our People and Culture

MAb development presents high technical hurdles, and the success of our development efforts isdependent on an experienced and knowledgeable work-force. We were founded by a team of industryveterans, with decades of cumulative experience in biologics development and commercialization at someof the leading biopharmaceutical companies including Eli Lilly and Company, Bristol-Myers SquibbCompany, Pfizer, Inc., or Pfizer, and Genentech, Inc. Our leadership team has built a platform with thegoal of expeditiously identifying, developing, manufacturing and commercializing mAb biosimilars in anefficient and cost-effective manner. We have fostered a culture of agility, collaboration and efficientdecision-making with a focus on scientific rigor, which we believe forms the core of our BioSymphonyPlatform.

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(i) future commercial potential;

(ii) alignment of the reference product’s patent expiry against the requisite development timelines;

(iii) probability of technical success; and

(iv) global competitive landscape.

* All clinical trial milestones subject to securing development partners.

(1) According to recent filings with the Securities and Exchange Commission, where available, EvaluatePharma andmanufacturers’ reports.

(2) We currently have an arrangement with Zhejiang Huahai Pharmaceutical Co. Ltd., or Huahai for the co-developmentand joint commercialization of ONS-3010 in certain major developed markets, including the United States and EU.Assuming Huahai funds its proportionate share of development costs incurred after completion of the “Phase-3 ReadyPackage” for ONS-3010, we will have a 49% value ownership interest with Huahai having a 51% value ownershipinterest in ONS-3010.

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BioSymphony Contract Development and Manufacturing (CDM) Program

In 2018, we plan to expand the capacity and capabilities of our BioSymphony Platform to accelerate andmaximize commercial revenues from our core expertise in drug development and manufacturing. With thecompletion of this expansion, we expect to begin generating commercial revenue in 2019 to cover thebasic operating costs of running our business, which will allow us to use any funds generated from ourpartnerships or other transactions for investment directly in our development pipeline.

The initial focus of the CDM Program will be to assist development stage biopharmaceutical andbiotechnology companies with the development and manufacturing of their drug product candidates forclinical trials. We believe that we will be able to provide a flexible and cost effective alternative to thelarger contract manufacturing organizations currently serving this market.

Our Product Candidate Portfolio

We are currently developing a portfolio of commercially attractive mAb biosimilars, for which thecorresponding reference products generated an aggregate of over $40 billion in global revenue in 2016.Our strategy is to develop our early stage biosimilar product candidates to the point of lab scale similarityand only move ahead into clinical trials with a licensing or co-development partner. Similarly, we intend toonly move our most advanced biosimilar product candidates into Phase 3 clinical trials with the help of alicensing and/or co-development partner.

We selected the product candidates in our pipeline on the basis of an internal evaluation process thatrelies on a weighted criteria comprised of the following factors:

In addition to our biosimilar product candidates, we are planning to begin development and completeproof-of-concept testing in 2018 for ONS-5010, an innovative mAb we will develop using theBioSymphony Platform.

The most advanced mAb biosimilars in our pipeline are described in the following chart.

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ONS-3010 — Adalimumab (Humira) Biosimilar

Humira, the reference product for ONS-3010, is a subcutaneous injectable mAb that binds to TNFα. TNFαbelongs to a family of pro-inflammatory cytokines, or soluble protein mediators, that are key initiators ofimmune-mediated inflammation in many different diseases, such as rheumatoid arthritis, psoriatic arthritis,psoriasis, ankylosing spondylitis, Crohn’s disease and ulcerative colitis. Several biologic agents, includingHumira, have been developed to inhibit the inflammatory activity of TNFs in the context of these diseasesand are collectively referred to as the anti-TNF class of therapeutics.

Market Opportunity

Worldwide sales of Humira were $16.1 billion in 2016, with approximately $10.4 billion in the UnitedStates and projected to grow to $20.0 billion worldwide by 2020, and it is one of the world’s bestsellingdrugs.

Humira has been approved by the FDA and the EMA for the treatment of 10 and 12 indications,respectively. Humira is currently approved in the United States for the following indications: rheumatoidarthritis, juvenile idiopathic arthritis, psoriatic arthritis, ankylosing spondylitis, adult Crohn’s disease,pediatric Crohn’s disease, ulcerative colitis, plaque psoriasis, hidradenitis suppurativa and uveitis. Weinitially intend to seek approval of ONS-3010, a subcutaneous injectable, for the treatment of plaquepsoriasis, and will pursue extrapolation of ONS-3010 across all eligible approved indications in order tomaximize the commercial potential for ONS-3010. We have also designed our Phase 3 clinical trial forONS-3010 in a way that we believe will enable us to also seek an interchangeability designation in theUnited States and have reviewed our trial design with the FDA and the EMA.

Chemistry Manufacturing Controls, or CMC, Status

We have manufactured and characterized a master cell bank from a selected clone and demonstrated itsstability in accordance with global regulatory guidelines. We have also completed development of theONS-3010 commercial manufacturing process. A novel formulation of similar stability was developed andused in the Phase 1 clinical trial and this same formulation is expected to be used for a planned Phase 3clinical trial.

We have confirmed that the amino acid sequence of ONS-3010 matches Humira. Extensive analyticalcharacterization and in vitro studies comparing ONS-3010 to both the U.S. and the EU versions of Humirawere completed and a representative overlay demonstrating equivalent potency is shown in the followingfigure. Luminescence is a highly sensitive method for assaying cell proliferation and cytotoxicity. Potencyis measured based on a comparison of the dose dependent response of the test article to the referencearticle. Based on the result of this assay and numerous analytical and in vitro characterization data, weinitiated a Phase 1 clinical trial to assess pharmacokinetics, or PK, and safety. PK means how the bodyaffects the molecule.

Comparative Potency of ONS-3010 versus Humira (U.S. and EU)

ONS-3010 (triangles), U.S.-Humira (squares), EU-Humira (circles).

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Clinical Development Status and Clinical Trial Data

We have successfully completed a randomized, double-blind, single-dose and single-center Phase 1clinical trial comparing ONS-3010 to Humira in 198 subjects receiving a 40 mg dose in three treatmentarms: ONS-3010, U.S.-Humira and EU-Humira. This Phase 1 clinical trial was performed at the Center forHuman Drug Research in Leiden, The Netherlands under the auspices of the Stichting BeoordelingEthiek Biomedisch Onderzoek. In this trial, ONS-3010 met its primary and secondary endpoints,demonstrating a similar PK profile, as well as an immunogenicity profile equivalent to both U.S. - and EU-Humira across all three treatment arms. ONS-3010 was well tolerated and demonstrated a favorablesafety profile, which was similar to the safety profile for both U.S.- and EU-Humira, and demonstrated alower injection site reaction rate than both U.S.- and EU-Humira. The following figure demonstrates themean concentration-time profile of U.S.-Humira, EU-Humira and ONS-3010. The vertical line at day onedenotes dosing. These results suggest a high degree of similarity between the three products.

Primary PK Endpoint (AUC0-∞)

The following figure demonstrates the effect of anti-drug antibodies on the concentrations (AUC, or areaunder the curve) for the three products. There were no significant differences in either the amount of anti-drug antibodies formed or their effect on concentration between the three products, which again suggesta high degree of similarity between the three products.

Effect of ADA-result on AUC0-inf

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The following table reports the most frequently reported adverse events regardless of relationship. Themost frequent occurring adverse event was local administration site irritation (either burning sensation orpain upon injection at the injection site), which was observed less frequently in the ONS-3010 treatmentgroup.

Adverse EventONS-3010

N (%)EU-Humira

N (%)U.S.-Humira

N (%) Burning sensation 12 (18.2) 29 (43.9) 31 (47.0) Headache 29 (43.9) 20 (30.3) 27 (39.4) Nasopharyngitis 12 (18.2) 19 (28.8) 12 (18.2)

Regulatory Status and Development Plan

Prior to commencement of our Phase 1 clinical trial in 2014, we received feedback from both FDA andEMA, which provided guidance for the design of the clinical trial and our similarity testing approach. Sincecompletion of the Phase 1 clinical trial, we had additional regulatory meetings with the FDA and the EMA,as well as other national regulatory agencies such as the Medicines and Healthcare Products RegulatoryAgency, or MHRA, and the Swedish regulatory authority, and obtained further guidance on the Phase 3clinical trial design in plaque psoriasis and the general similarity development plan for registration. Wehave completed a site feasibility study to identify global sites (North and South America, Europe, Australiaand New Zealand) in preparation for the commencement of our planned Phase 3 clinical trial.

ONS-1045 — Bevacizumab (Avastin) Biosimilar

Avastin, the reference product for ONS-1045, is a mAb administered by infusion that interferes with tumorgrowth by binding to VEGF, a protein that stimulates the formation of new blood vessels.

Market Opportunity

Worldwide sales of Avastin were approximately $7.5 billion in 2016 and are projected to remain relativelyflat through 2019. Avastin has been approved by the FDA and the EMA for the treatment of seven andeight indications, respectively. Avastin is currently approved in the United States for the followingindications: metastatic colorectal cancer, with intravenous 5-fluorouracil-based chemotherapy for first- orsecond-line treatment; metastatic colorectal cancer, with fluoropyrimidine- irinotecan- or fluoropyrimidine-oxaliplatin-based chemotherapy for second-line treatment in patients who have progressed on a first-lineAvastin containing regimen; non-squamous non-small cell lung cancer, with carboplatin and paclitaxel forfirst line treatment of unresectable, locally advanced, recurrent or metastatic disease; glioblastoma, as asingle agent for adult patients with progressive disease following prior therapy; metastatic renal cellcarcinoma with interferon alfa; cervical cancer, in combination with paclitaxel and cisplatin or paclitaxeland topotecan in persistent, recurrent, or metastatic disease; platinum-resistant recurrent epithelialovarian, fallopian tube or primary peritoneal cancer, in combination with paclitaxel, pegylated liposomaldoxorubicin or topotecan. We initially intend to seek approval of ONS-1045, which will be delivered byinfusion, for the treatment of non-squamous non-small cell lung cancer, and will pursue extrapolationacross all approved indications, in order to maximize the commercial potential for ONS-1045.

CMC Status

We have manufactured and characterized a master cell bank from a selected clone and demonstrated itsstability in accordance with global regulatory guidelines. In addition, we have completed development ofthe ONS-1045 commercial manufacturing process.

We have confirmed that the amino acid sequence of ONS-1045 matches Avastin. Extensive analyticalcharacterization and in vitro studies comparing ONS-1045 to both the U.S. and the EU-Avastin werecompleted and a representative overlay demonstrating equivalent potency is shown in the followingfigure.

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Comparative Potency of ONS-1045 versus Avastin (U.S. and EU)

ONS-1045 (triangles), U.S.-Avastin (circles), EU-Avastin (squares)

In preparation for producing Phase 3 clinical supplies, we are manufacturing ONS-1045 using ourcommercial scale process at our manufacturing facility. These batches will be filled into vials at acontracted U.S.-based commercial fill-finish facility.

Clinical Development

We have completed a randomized, double-blind, single-dose and single-center Phase 1 clinical trialcomparing ONS-1045 to U.S.-licensed Avastin and EU-licensed Avastin in 135 subjects. This Phase 1trial was performed at the Center for Human Drug Research in Leiden, The Netherlands under theauspices of the Stichting Beoordeling Ethiek Biomedisch Onderzoek. PK data, safety and immunogenicitywere collected for a total of 98 days after a single 2.0 mg/kg dose. In this trial, ONS-1045 met its primaryand secondary endpoints demonstrating a similar PK profile, as well as an immunogenicity profileequivalent to both U.S.- and EU-Avastin. Safety was comparable across all three groups. Immunogenicitywas low with only one subject in the EU-licensed Avastin arm developing an anti-drug antibody, or ADA,at day 98. No neutralizing antibodies were detected in any arm. The following figure demonstrates theconcentration-time profile of ONS-1045, U.S.-licensed Avastin, and EU-licensed Avastin as the mean.The vertical line at time zero denotes dosing. These results suggest a high degree of similarity betweenthe three products.

Primary PK Endpoint (AUC0-∞)

Regulatory Status and Development Plan

Prior to the commencement of a Phase 1 clinical trial in 2015, we received feedback from both the FDAand the EMA, which provided guidance for the clinical trial design and similarity testing approach. Wehave

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completed the next series of our regulatory interactions to obtain further guidance on our confirmatory trialdesign. Based on input from the FDA, EMA, MHRA and the Danish Health and Medicines Agency, webelieve we have designed the appropriate confirmatory trial.

ONS-1050 — Trastuzumab (Herceptin) Biosimilar

Trastuzumab (Herceptin), the reference product for ONS-1050, is a mAb administered by infusion thatbinds to HER2. Herceptin has been shown to inhibit the proliferation of human tumor cells thatoverexpress HER2.

Market Opportunity

According to the Roche Annual Report for 2016, worldwide sales of Herceptin totaled approximately$7.5 billion in 2016. Herceptin is currently approved for HER2+ breast cancer and HER2+ metastaticgastric cancer in both the United States and the EU, as well as HER2+ gastroesophageal junction cancerin the United States. Worldwide sales of Herceptin grew approximately 3% in the first half of 2017. Wehave not yet determined the indication for which we will initially seek approval of ONS-1050. However, wewill pursue extrapolation of ONS-1050 across all approved indications, in order to maximize thecommercial potential for ONS-1050, and will deliver ONS-1050 by infusion.

CMC Status

A clone with a highly similar profile to Herceptin has been chosen for further process development. Wehave demonstrated the stability of the cell line, and characterization of the master cell bank.Manufacturing process development for ONS-1050 is nearing completion. We have confirmed that theamino acid sequence of ONS-1050 matches Herceptin. Extensive analytical characterization and in vitrofunctionality studies comparing ONS-1050 to Herceptin are underway and expected to support thebiosimilarity assessment required to initiate clinical trials. A representative overlay demonstratingequivalent potency of ONS-1050 to U.S. and EU-Herceptin is shown in the following figure.

Comparative Potency of ONS-1050 versus Herceptin (U.S. and EU).

ONS-1050 (squares), U.S.-Herceptin (circles), EU-Herceptin (triangles)

We are planning to manufacture ONS-1050 for a Phase 1 PK study using our commercial scale processat our manufacturing facility. This batch is expected to be vialed at a U.S. pharmaceutical filling facility.

Regulatory Status and Development Plans

We received initial EMA guidance in the second quarter 2014 that supports our approach to the initialPhase 1 trial design. In accordance with our regulatory strategy and in advance of initiating Phase 1clinical trials, we plan to interact with FDA, as well as other national regulatory agencies such as MHRAand the Federal Institute for Drugs and Medical Devices, to also obtain further guidance on study design.We expect to be ready to commence our Phase 1 clinical trial upon securing either a co-development orlicensing partner for ONS-1050 or additional funding.

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Preclinical Biosimilar Pipeline

In addition to the product candidates we are currently advancing through clinical development, we areleveraging our BioSymphony Platform to develop additional preclinical candidates. Further development ofsuch preclinical product candidates is subject to ongoing commercial analysis, among other items. Wehave not yet determined the initial indications for which we will seek approval for such preclinical productcandidates. Our strategy will be to seek initial approval for an approved indication of the referenceproduct, which will be determined in consultation with regulatory authorities regarding clinical trial andstudy design, and then seek to expand such approval to the same indications as the reference product.We also intend to deliver our biosimilars in the same manner as the reference product.

We have developed cell lines and completed clone selection for ONS-4010, a biosimilar to denosumab(Prolia/Xgeva). Denosumab is a fully human mAb with affinity and specificity for human RANKL. Prolia isa subcutaneous injectable currently approved in the United States for treatment (i) of postmenopausalwomen with osteoporosis at high risk for fracture, (ii) to increase bone mass in men with osteoporosis athigh risk for fracture, (iii) to increase bone mass in men at high risk for fracture receiving androgendeprivation therapy for nonmetastatic prostate cancer and (iv) to increase bone mass in women at highrisk for fracture receiving adjuvant aromatase inhibitor therapy for breast cancer. Xgeva is asubcutaneous injectable currently approved in the United States for prevention of skeletal-related eventsin patients with bone metastases from solid tumors, treatment of adults and skeletally mature adolescentswith giant cell tumor of bone that is unresectable or where surgical resection is likely to result in severemorbidity, and treatment of hypercalcemia of malignancy refractory to bisphosphonate therapy. We havecompleted preliminary characterization and the reverse engineering of the amino acid sequences of thereference product. According to manufacturers’ reports and recent filings with the Securities andExchange Commission, 2016 worldwide sales of Prolia/Xgeva were approximately $3.2 billion.

Additionally, ONS-3040, a biosimilar to ustekinumab (Stelara ), is in early stage development. Accordingto manufacturers’ reports, 2016 worldwide sales of Stelara were $3.2 billion. We are focused on reverseengineering the reference product characteristics and developing cell lines for clone selection. In 2018, weanticipate completing reference product characterization for ONS-3040. We continue to evaluate otherbiosimilar product candidates for our pipeline pending additional interest from potential developmentpartners.

ONS-5010 — Innovative mAB Drug Product Candidate

We have been presented with an opportunity to utilize our expertise and capabilities in developing andmanufacturing mAb biosimilars to develop and commercialize an innovative mAb biotherapeutic for asignificant patient population. Our intent is to request and receive feedback from regulatory authorities inearly 2018 and, if positive, proceed into Phase 1 clinical trials later in 2018. The innovative ONS-5010development program is being designed to potentially begin generating revenues by 2021.

Commercialization, Sales and Marketing

Our commercialization strategy is to maximize the revenue potential of our biosimilar product candidatesalong with seeking and securing licensing opportunities to fund the development of our assets. Wecurrently intend to enter into strategic collaborations and partnerships with biotechnology andpharmaceutical companies in the United States and other regions to maximize the commercial value ofour pipeline. Our intent is to enter into partnerships that result in economic and transactional efficienciesby including upfront and post-Phase 1 development payments that would, in large part, offset globalPhase 3 clinical development costs for each biosimilar product candidate. For example, we have a jointparticipation agreement in place for ONS-3010 with Zhejiang Huahai Pharmaceutical Co., Ltd., or Huahai,whereby we share post-Phase 1 development costs with Huahai, and proportionately share the revenuesfrom commercialization of ONS-3010 in the United States, Canada, EU, Japan, Australia and NewZealand. We could also be required to form a joint venture to further develop and commercialize ONS-3010 with Huahai in the agreed countries, if so requested by Huahai. However, we do not have any otherdevelopment and commercialization agreements for the United States or for major ex-U.S. markets, suchas the EU and Japan.

®

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For emerging markets opportunities, in 2012 and 2013, we established early country-specific partnershipsfor ONS-3010 and ONS-1045 in China with Huahai, in India with IPCA Laboratories Limited, or IPCA, andin Mexico with Laboratories Liomont, S.A. de C.V., or Liomont, and in September 2017 we entered into anagreement with GMS Tenshi Holdings Pte. Limited, or GMS Tenshi, providing for the license of rights toONS-3010 and ONS-1045 in emerging markets excluding China, India and Mexico. In each of thesesmaller ex-U.S. markets, we have identified potential synergies between our partner’s strategy to enterthe biologics marketplace and access to our biosimilar development platform. For many of these emergingmarket opportunities, our partners may be able to take advantage of differing regulatory requirements thatcould allow us to begin generating sales as early as 2020, before we begin to generate commercialrevenue in regions like the United States, the EU and Japan.

The United States and the EU are expected to be the largest and economically most attractive biosimilarmarkets and we plan to actively pursue licensing partners for both the United States and the EU. Ifrequired, we intend to build our commercialization infrastructure through an option to outsource the salesand marketing work force via a contract sales organization. As such, we have engaged a consultingcompany to evaluate our options and to assist with the development of a U.S. sales and marketingstrategy. We have also entered into a strategic collaboration agreement with Premier Healthcare Alliance,L.P., or Premier, a developer of a network of U.S. hospitals and healthcare providers, focused on data-gathering and cost-reduction strategies to improve the outcome of its members.

Under the agreement, we are partnering with Premier to share knowledge and strategize about how tomost efficiently deliver our innovative and cost-effective mAb biosimilars in the U.S. market. We currentlyfocus on those critical success factors associated with commercial success, namely the identification andinteractions between (i) payors, (ii) providers, (iii) pharmacy benefit management organizations,(iv) patients and (v) physicians. We are currently developing a strategic roadmap that entails(i) developing and validating our commercialization strategy; (ii) exploring/establishing a distribution andcommercialization relationship; and (iii) eventually developing our own sales and marketing force.

We believe that the U.S. biosimilar market adoption and penetration rates for each biosimilar will bedetermined primarily by four key factors: (1) the prevalence of payor incentives to drive substitution,(2) the physician and patient share influence relative to the payor in the prescribing decision, (3) rapidityof feedback on the safety and efficacy of the drug based on the totality of the patient response and(4) patient criticality (the degree of severity in the patient’s condition).

Collaboration and License Agreements

We enter into collaboration and license agreements in the ordinary course of our business. We have in-licensed certain technology from Selexis SA, or Selexis, that we are using to research and develop ourbiosimilar product candidates. For biosimilar product candidates developed using the Selexis technology,we enter into commercial license agreements with Selexis that give us rights to commercialize, fileinvestigational new drugs, or INDs and enter into collaborative arrangements with third parties for thefurther development and commercialization of such biosimilar product candidates. Our commercializationstrategy is to potentially retain U.S. rights to select biosimilar product candidates while entering intoadditional strategic collaborations and partnerships in other regions to maximize the commercial value ofour pipeline. Although we do not yet have any such agreements for major ex-U.S. markets, such as theEU or Japan, we have licensing and collaboration agreements with select partners for smaller ex-U.S.markets where we would not otherwise intend to commercialize our biosimilar product candidates,including India, Mexico and China, which agreements have collectively provided an aggregate of $29.0 million in payments as of September 30, 2017.

Selexis — Humira (ONS-3010), Avastin (ONS-1045) and Herceptin (ONS-1050)

In October 2011, we entered into a research license agreement with Selexis pursuant to which weacquired a non-exclusive license to conduct research internally or in collaboration with third parties todevelop recombinant proteins from mammalian cells lines created using the Selexis expressiontechnology, or the Selexis Technology. The original research license had a three-year term, but onOctober 9, 2014, was extended for an additional three-year term through October 9, 2017. We arecurrently in discussions with Selexis to extend the research license for an additional year. We maysublicense our rights with Selexis’ prior

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written consent but are prohibited from making commercial use of the Selexis Technology or the resultantrecombinant proteins comprising our biosimilars in humans, or from filing an IND, absent a commerciallicense agreement with Selexis covering the particular biosimilar product candidate developed under theresearch license.

In connection with the entry into the research license, we paid Selexis an initial fee of CHF 100,000(approximately $0.1 million) and agreed to make additional annual maintenance payments of the sameamount for each of the three years that the research license agreement term was extended. We expectthat we will need to pay Selexis a similar amount in connection with the further extension one-yearextension of the research license that we are currently negotiating. As of September 30, 2017, we havepaid Selexis an aggregate of approximately $0.6 million under the research license agreement.

Selexis also granted us a non-transferrable option to obtain a perpetual, non-exclusive, worldwidecommercial license under the Selexis Technology to manufacture, or have manufactured, a recombinantprotein produced by a cell line developed using the Selexis Technology for clinical testing andcommercial sale. We exercised this option in April 2013 and entered into three commercial licenseagreements as described more fully below.

Either party may terminate the research license in the event of an uncured material breach by the otherparty or in the event the other party becomes subject to specified bankruptcy, winding up or similarcircumstances. Either party may terminate the research license under designated circumstances if theSelexis Technology infringes third party proprietary rights. Although we have the right to terminate theresearch license at any time for our convenience, we agreed with our other collaborator parties to whomwe have sublicensed the Selexis Technology not to exercise such right without their consent, whichagreements are described below.

Commercial License Agreements

On April 11, 2013, following the exercise of our option to enter a commercial license under the Selexisresearch license, we entered into commercial license agreements with Selexis for each of the ONS-3010,ONS-1045 and ONS-1050 biosimilar product candidates that were developed under the research license(which agreements were subsequently amended on May 21, 2014). Under the terms of each commerciallicense agreement, we acquired a non-exclusive worldwide license under the Selexis Technology to usethe cell lines developed under the research license and related materials, to manufacture andcommercialize licensed and final products, with a limited right to sublicense.

We were required to pay an upfront licensing fee of CHF 65,000 (approximately $0.1 million) to Selexis foreach commercial license and also agreed to pay up to CHF 365,000 (approximately $0.4 million) inmilestone payments for each licensed product. In addition, we are required to pay a single-digit royalty ona final product-by-final product and country-by-country basis, based on worldwide net sales of such finalproducts by us or any of our affiliates or sublicensees during the royalty term. The royalty term for eachfinal product in each country is the period commencing from the first commercial sale of the applicablefinal product in the applicable country and ending on the expiration of the specified patent coverage. Atany time during the term, we have the right to terminate our royalty payment obligation by providingwritten notice to Selexis and paying Selexis a royalty termination fee of CHF 1,750,000 (approximately$1.8 million). As of September 30, 2017, we have paid Selexis an aggregate of approximately $0.3 millionunder the commercial license agreements.

Each of our commercial agreements with Selexis will expire in its entirety upon the expiration of allapplicable Selexis patent rights. The licensed patent rights consist of two patent families. The first patentfamily relates to methods of transferring cells, and is filed in the United States, Australia, Canada, Europe,Japan and Singapore. This patent family will begin to expire worldwide in 2022. The second patent familyclaims DNA compositions of matter useful for having protein production increasing activity. This patentfamily is filed in the United States, Australia, Canada, China, Europe, Hong Kong, Israel, India, Japan,South Korea, Russia, Singapore and South Africa. This patent family will begin to expire worldwide in2025. Either party may terminate the related agreement in the event of an uncured material breach by theother party or in the event the other party becomes subject to specified bankruptcy, winding up or similarcircumstances.

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Either party may also terminate the related agreement under designated circumstances if the SelexisTechnology infringes third-party intellectual property rights. In addition, we have the right to terminateeach of the commercial agreements at any time for our convenience; however, with respect to theagreements relating to ONS-3010 and ONS-1045, this right is subject to Liomont’s consent pursuant to acorresponding letter we executed in conjunction with the standby agreement entered into between Selexisand Liomont on November 11, 2014. The standby agreement permits Liomont to assume the licenseunder the applicable commercial agreement for Mexico upon specified triggering events involving ourbankruptcy, insolvency or similar circumstances.

Ex-U.S. Collaboration and License Agreements

Aside from our joint participation agreement in place for ONS-3010 with Huahai, whereby we agreed toshare post-Phase 1 development costs, and proportionately share the revenues from commercializationof ONS-3010 in the United States, Canada, EU and Japan, among other markets, and under which wecould be required to form a joint venture with Huahai for ONS-3010 if so requested by Huahai, we do nothave any commercial license or development agreements for the United States or for major ex-U.S.markets, such as the EU or Japan. We currently have collaboration and license agreements for smallerex-U.S. markets and, collectively, such agreements have provided an aggregate of  $29.0 million inpayments as of September 30, 2017 for our most advanced biosimilar product candidates. Our contractsinclude agreements with IPCA (for ONS-3010, ONS-1045 and ONS-1050 in India and other regionalmarkets), Liomont (for ONS-3010 and ONS-1045 in Mexico), Huahai (for ONS-3010 and ONS-1045 inChina) and GMS Tenshi (for ONS-3010 and ONS-1045 in emerging markets excluding China, India andMexico). Our arrangements with these partners generally include a strategic license for a defined territoryfor agreed biosimilar product candidates, and may also include agreements to assist with research anddevelopment to assist our contract counterparty in establishing their own mAb research, development andmanufacturing capabilities. Under our existing strategic licensing agreements, we generally received anupfront payment upon execution, and have the ability to earn additional regular milestone payments andthe right to receive royalties (generally a mid-single digit to low-teens percentage rate) based on net salesin the agreed territory. Our existing agreements to assist with research and development also included anupfront payment upon execution, and we have the ability to earn additional regular milestone payments,and the right to receive royalties (generally a mid-single digit to low-teens percentage rate) based on netsales in the agreed territory.

Generally, our agreements expire on a product-by-product basis on the date of the expiration of theroyalty revenue term for all products in the territory. The royalty revenue term is 10 years from the date offirst commercial sale and any renewal is subject to good faith negotiation. The license term for the agreedterritory is perpetual. Either party may terminate the agreement in its entirety or with respect to aparticular product if the other party materially breaches the agreement, subject to specified notice andcure periods. In addition, we have the right to terminate the agreement in connection with anyinterference, opposition or challenge of our patent rights. If the agreement is terminated due to ourbreach, our contract counterparty is generally free to use all applicable technology and know-how that wehave provided under the agreement.

As noted above, our collaboration agreements with Huahai also includes a joint participation agreement,which provides for the co-funding of development of ONS-3010 in the United States, Canada, EU, Japan,Australia and New Zealand and the proportionate sharing of the revenues from commercialization ofONS-3010 in the agreed countries, and also provides for the formation of a joint venture with Huahai tofurther develop and commercialize ONS-3010 with Huahai in the agreed countries, if so requested byHuahai.

In the event Huahai funds its proportionate share of development costs incurred after completion of the“Phase-3 Ready Package,” Huahai would be entitled to retain its 51% value ownership, with us entitled toretain our 49% value ownership, of ONS-3010 in the agreed countries. Similarly, revenues from thecommercialization of ONS-3010 in the agreed countries (including major markets such as the UnitedStates and the EU, among others), would also be shared based on such proportional ownership interests.In the event that Huahai does not fund its proportionate share of such development costs, the jointparticipation agreement provides for a proportionate adjustment to our respective value ownershipinterests based on our respective investments in such development costs, which would increase ourvalue ownership interest in ONS-3010.

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Throughout the term of the joint participation agreement, we and our affiliates are prohibited from, directlyor indirectly, conducting or having conducted or funding any discovery, research, development,regulatory, manufacturing or commercialization activity, alone or in collaboration with a third party, of anybiosimilar product having the same reference product as the ONS-3010 compound or correspondingproducts, for use in the United States, Canada, EU, Japan, Australia and New Zealand, other than ONS-3010 with Huahai pursuant to the joint participation agreement.

Unless terminated early upon mutual agreement of the parties, or due to a material breach of either partythat is uncured, the joint participation agreement will terminate upon entry into a mutually acceptablecollaboration agreement between us and Huahai for ongoing development and commercialization ofONS-3010 in the agreed countries, or we and Huahai enter into an agreed license with a third party forsuch ongoing development and commercialization of ONS-3010 in the agreed countries. If the jointparticipation agreement is terminated for cause due to our breach, we could be required to refund Huahaiany amounts funded by Huahai to develop ONS-3010, as well as pay Huahai a 6% royalty on net salesmade by us or an affiliate, as well as 25% of revenues we receive from a sublicensee for commercialsales of ONS-3010 until the aggregate of such payments is equal to 10 times the amount Huahai fundedfor the development of ONS-3010.

Furthermore, if we were to file a voluntary petition in bankruptcy, or have an involuntary petition filed thatwe could not dismiss within 120 days, then Huahai would be granted an exclusive license to continue thedevelopment and commercialization of ONS-3010 in the agreed countries.

As of September 30, 2017, we have received an aggregate of  $5.0 million of payments from IPCA underour various agreements, an aggregate of  $3.0 million of payments from Liomont under our variousagreements, an aggregate of  $16.0 million of payments from Huahai under our various agreements,$10.0 million of which were pursuant to the joint participation agreement and an aggregate of  $5.0 millionfrom GMS Tenshi under our joint development and licensing agreement.

Competition

Biosimilars have become a significant growth area for the biopharmaceutical industry, attracting largepharmaceutical companies as well as small niche players. Biosimilars of complex mAbs have limitedcompetition to those industry players who have a high technical capability. The large players who havesuccessfully taken mAb products into Phase 3 clinical trials include Amgen Inc., or Amgen, BoehringerIngelheim GmbH, or Boehringer, Hanwha Chemical Corporation, Pfizer, Samsung Bioepis Co., Ltd. (aMerck/Biogen/ Samsung biosimilar venture), or Bioespis, Sandoz International GmbH, or Sandoz andTeva Pharmaceutical Industries, Ltd, while smaller niche players with clinical assets include us, AdelloBiologics, LLC, Celltrion, Inc., or Celltrion, Coherus Biosciences, Inc., or Coherus and Mylan N.V., orMylan, as well as other regional developers.

Additionally, companies developing novel products with similar indications, and the innovator companiesthat are implementing protection strategies are expected to influence our ability to penetrate and maintainmarket share. Competition from generic small molecule manufacturers may also arise although thesecompanies are less likely to have the technical, regulatory and clinical expertise required to succeed inthis market unless they partner or acquire experienced biotech entities.

Our principal mAb biosimilar competitors include both companies with biologic reference products, suchas AbbVie, Inc. (the holder of rights to Humira), Genentech Inc. (the holder of rights to the Avastin andHerceptin), as well as those with biosimilar products and/or reference products, such as Pfizer (pipeline,which includes at least five biosimilar candidates), Amgen (pipeline, which includes at least six biosimilarcandidates with two FDA-approved biosimilar products), Sandoz (as a biosimilar company with two FDA-approved biosimilar products), and Merck & Co., Inc., or Merck with one FDA-approved biosimilar (throughits joint venture collaboration aimed at developing and commercializing biosimilar candidates withSamsung Bioepsis). Companies principally engaged in biosimilar development include Samsung Bioepsis(pipeline, which initially includes six biosimilar candidates), Coherus (pipeline, which includes at leastthree biosimilar candidates), Mylan (pipeline, with seven biosimilar programs), and Celltrion (pipeline, withan FDA-approved biosimilar and at least five other biosimilar candidates). Many of our competitors, eitheralone or with their strategic partners, have substantially greater financial, technical and human

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resources than we do and greater experience in the discovery and development of mAb productcandidates, obtaining FDA and other regulatory approvals of treatments and commercializing thosetreatments. Accordingly, our competitors may be more successful than us in obtaining approval for mAbbiosimilars and achieving widespread market acceptance. Our competitors’ treatments may be moreeffectively marketed and sold than any products we may commercialize that may cause limited marketshare before we can recover the expenses of developing and commercializing any of our productcandidates.

Mergers and acquisitions in the biotechnology and pharmaceutical industries may result in even moreresources being concentrated among a smaller number of our competitors. Smaller or early-stagecompanies may also prove to be significant competitors, particularly through collaborative arrangementswith large and established companies. These activities may lead to consolidated efforts that allow formore rapid development of mAb biosimilar candidates than us.

These competitors also compete with us in recruiting and retaining qualified scientific and managementpersonnel, the ability to work with specific clinical contract organizations due to conflict of interest, and theconduct of trials in the ability to recruit clinical trial sites and subjects for our clinical trials.

We expect any products that we develop and commercialize to compete on the basis of, among otherthings, efficacy, safety, price and the availability of reimbursement from government and other third-partypayors. Our commercial opportunity could be reduced or eliminated if our competitors develop andcommercialize products that are viewed as safer, more convenient or less expensive than any productsthat we may develop. Our competitors also may obtain FDA or other regulatory approval for their productsmore rapidly than we may obtain approval for ours, which could result in our competitors establishing astrong market position before we are able to enter the market.

Further, we are planning to begin providing contract development and manufacturing services todevelopment stage biopharmaceutical and biotechnology companies on a fee for service basis. There arecurrently a number of large, well-established competitors in this market, including; Albany MolecularResearch Inc., Cambrex Corporation, Catalent, Inc, Consort Medical plc, DPx Holdings B.V., LonzaGroup AG-REG, Recipharm AB, and Siegfried AG. While we believe that the companies we intend totarget are underserved by these contract manufacturing companies, our competitors have been providingthese services for an extended period of time and have long term relationships with many of thecompanies we may target as clients.

Intellectual Property

Our commercial success depends in part on our ability to avoid infringing the proprietary rights of thirdparties, our ability to obtain and maintain proprietary protection for our technologies where applicable andto prevent others from infringing our proprietary rights. We seek to protect our proprietary technologies by,among other methods, evaluating relevant patents, establishing defensive positions, monitoring EUoppositions and pending intellectual property rights, preparing litigation strategies in view of theU.S.legislative framework and filing U.S. and international patent applications on technologies, inventionsand improvements that are important to our business. As of September 30, 2017, we own six pendinginternational applications that were filed under the Patent Cooperation Treaty, or PCT, which relate toformulations developed for ONS-3010 and ONS-1045, methods of antibody purification, methods forpurifying antibodies to separate isoforms, reducing high molecular weight species, and modulatingafucosylated species as well as efficiently determine the amino acid sequence of antibodies. If granted,patents issuing from these six pending PCT applications are expected to expire in 2036 or 2037, absentany adjustment or extensions. In addition, we own two provisional patent applications related to newformulations for ONS-3010 at higher concentrations. Any patents that may eventually issue claimingpriority to these two provisional patent applications are expected to expire in 2038. The PCT is aninternational patent law treaty that provides a unified procedure for filing patent applications to protectinventions in each of its contracting states. Thus, a single PCT application can be converted into a patentapplication in any of the more than 145 PCT contracting states, and is considered a simple, cost-effectivemeans for seeking patent protection in numerous regions or countries. This nationalization (convertinginto an application in any of the contracting states) typically occurs 18 months after the PCT applicationfiling date. Our first PCT application was nationalized in April 2016 in Australia, Canada, China, Europe,Hong Kong, India, Japan, Mexico and the United States. If granted, patents issuing from these nineapplications

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are expected to expire in 2034, absent any adjustments or extensions. Our second PCT application wasnationalized in July 2017 in Europe and the United States. If granted, patents issuing from these twoapplications are expected to expire in 2036, absent any adjustments or extensions. We also rely on tradesecrets, know-how and continuing technological innovation to develop and maintain our proprietaryposition.

The term of individual patents depends upon the legal term of the patents in countries in which they areobtained. In most countries, including the United States, the patent term is generally 20 years from theearliest date of filing a non-provisional patent application in the applicable country. In the United States, apatent’s term may, in certain cases, be lengthened by patent term adjustment, which compensates apatentee for administrative delays by the United States Patent and Trademark Office in examining andgranting a patent or may be shortened if a patent is terminally disclaimed over a commonly owned patentor a patent naming a common inventor and having an earlier expiration date.

Regulatory

Government Regulation and Product Approval

Government authorities at the federal, state and local level in the United States and in other countriesextensively regulate, among other things, the research, development, testing, manufacture, packaging,storage, recordkeeping, labeling, advertising, promotion, distribution, marketing, import and export ofbiopharmaceutical products such as our product candidates. The processes for obtaining regulatoryapprovals in the United States and in foreign countries, along with subsequent compliance with applicablestatutes and regulations, require the expenditure of substantial time and financial resources.

FDA Approval Process for Biosimilars

All of our current product candidates are subject to regulation in the United States by the FDA asbiologics. The FDA subjects biologics to extensive pre- and post-market regulation. The Public HealthService Act, or PHSA as amended by the Patient Protection and Affordable Care Act, or Affordable CareAct, and the Biologics Price Competition and Innovation Act, or BPCIA, govern the regulatory pathway forbiosimilar products. In addition, other federal and state statutes and regulations, govern, among otherthings, the research, development, testing, manufacture, storage, recordkeeping, approval, labeling,promotion and marketing, distribution, post-approval monitoring and reporting, sampling and import andexport of biologics. Failure to comply with applicable U.S. requirements may subject a company to avariety of administrative or judicial sanctions, such as FDA refusal to approve a pending biologics licenseapplication, or BLA, withdrawal of approvals, clinical holds, untitled and warning letters, product recalls,product seizures, total or partial suspension of production or distribution, injunctions, fines, civil penaltiesor criminal penalties.

Under the BPCIA, a biologic may be demonstrated to be “biosimilar” if data show that the product is“highly similar” to a reference product. This is demonstrated through extensive analytical studies, animalstudies (if deemed necessary), and clinical trials in a sensitive patient population to confirm that “residualuncertainties” do not have clinically meaningful impact. Developing the data to satisfy FDA pre-marketapproval requirements typically takes many years and the actual time required may vary substantiallybased upon the type, complexity and novelty of the product or disease.

Similar to innovator products, FDA requires submission of an Investigational New Drug application, orIND, prior to testing biosimilar investigational products in humans. The IND is composed of the clinicalprotocol and other documentation such as non-clinical and CMC data to assure the safe conduct of thestudy. The sponsor submits an IND to FDA to place the IND into effect. A 30-day waiting period after thesubmission of the IND is required prior to the commencement of clinical testing. If during the 30-daywaiting period the FDA does not raise concerns or questions related to the safety of the proposed clinicaltrials or other data submitted by imposing a clinical hold, the clinical trial may begin.

Prior to IND submission of a biosimilar candidate, if previous human data are not available or if theanalytical data warrant, in vivo preclinical tests may be required to assess the safety of the product. Otherpreclinical tests include laboratory evaluation of product chemistry, formulation and in vitro functionaltesting. This preclinical work is highly dependent on the development of robust analytical tests. An INDmust become effective before United States clinical trials may begin.

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Clinical trials for biosimilars involve the administration of the new investigational product to healthyvolunteers or patients with the condition under investigation, all under the supervision of a qualifiedinvestigator. Clinical trials must be conducted: (i) in compliance with federal regulations; (ii) in compliancewith good clinical practice, or GCP, an international standard meant to protect the rights and health ofpatients and to define the roles of clinical trial sponsors, administrators and monitors; as well as (iii) underprotocols detailing the objectives of the trial, the parameters to be used in monitoring safety and theeffectiveness criteria to be evaluated. Each protocol involving testing on U.S. patients and subsequentprotocol amendments must be submitted to the FDA as part of the IND.

The FDA may order the temporary or permanent discontinuation of a clinical trial at any time or imposeother sanctions if, among other things, it believes that the clinical trial either is not being conducted inaccordance with FDA requirements or presents an unreasonable and significant risk to the clinical trialpatients. The study protocol and informed consent information for patients in clinical trials must also besubmitted to an institutional review board, or IRB, for approval. An IRB may also require the clinical trial atthe site to be halted, either temporarily or permanently, for failure to comply with the IRB’s requirementsor may impose other conditions. The study sponsor may also suspend a clinical trial at any time onvarious grounds, including a determination that the subjects or patients are being exposed to anunacceptable health risk.

Clinical trials for biosimilar development are typically conducted in two sequential phases. In Phase 1, theinvestigational product is initially compared to the reference product by dosing healthy human subjects orpatients to assess PK, pharmacological actions, and safety. In the case of some products for severe orlife-threatening diseases, such as cancer treatments, initial human testing may be conducted in theintended patient population. A Phase 3 clinical trial is then undertaken to obtain additional informationabout clinical efficacy and safety, typically at geographically dispersed clinical trial sites. These Phase 3clinical trials are intended to demonstrate that any residual uncertainty about biosimilarity which may existafter conducting prior trials does not have clinical impact in light of the totality of the evidence for theproduct candidate. Well-designed and well-conducted trials conducted outside of the United States inaccordance with GCP are also acceptable to the FDA in support of product licensing if the FDA is able tovalidate the data from the study through an onsite inspection, if necessary. Other clinical study designsmay be acceptable to regulators if justified.

After successful completion of the required clinical testing in accordance with all applicable regulatoryrequirements, detailed information regarding the investigational product is prepared and submitted to theFDA in the form of a BLA requesting approval to market the product for one or more of the referenceproduct’s indications. FDA review and approval of the BLA is required before marketing of the productmay begin in the United States. The BLA must include the results of all preclinical, clinical and othertesting and a detailed compilation of data relating to the product’s pharmacology and CMC and mustdemonstrate the safety, purity and potency of the product based on these results. The cost of preparingand submitting a BLA is substantial. Under the Biosimilar User Fee Act, as reauthorized in 2017, orBsUFA II, the sponsor must submit initial and annual biological product development fees, an applicationfee at the time of submission of the BLA program fees for approved biosimilars. These fees are typicallyincreased annually and will total several million dollars over the product’s market life.

The FDA has 60 days from its receipt of a BLA to determine whether the application will be accepted forfiling based on the agency’s threshold determination that it is sufficiently complete to permit substantivereview. Once the submission is accepted for filing, the FDA begins an in-depth review. The FDA hasagreed to certain performance goals in the review of biosimilar BLAs. The FDA’s stated goal forfiscal years 2018 through 2022 is to review 90% of original biosimilar biologic applications withinten months of the 60 day filing date. Although the FDA can meet its user fee performance goals, thereview process may be extended by requests for additional information or clarification. The FDA reviews abiosimilar BLA to determine, among other things, whether the product candidate has no clinicallymeaningful differences from the reference product, and the manufacturing process and facility meetstandards designed to assure the product candidate’s continued safety, purity and potency. Beforeapproving a BLA, the FDA will typically inspect one or more clinical sites to assure compliance with GCP.Additionally, the FDA will inspect the

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facility or the facilities at which the product candidate is manufactured. The FDA will not approve theproduct candidate unless it verifies compliance with cGMP and the BLA contains adequate data thatprovide substantial evidence that the product candidate meets the requirement of  “highly similar” to thereference product.

After the FDA evaluates the BLA and the manufacturing facilities, it issues either an approval letter or acomplete response letter. A complete response letter generally outlines the deficiencies in the submissionand may require substantial additional testing or information in order for the FDA to reconsider theapplication. If, or when, those deficiencies have been addressed to the FDA’s satisfaction, the FDA willissue an approval letter. Under BsUFA II, the FDA has committed to reviewing 90% of resubmissions ofbiosimilar BLAs within six months of receipt. FDA approval is never guaranteed, and the FDA will notapprove a BLA if applicable regulatory criteria are not satisfied.

The approval of our product candidates may be significantly more limited than requested in theapplication, including limitations on the dosage forms (if multiple forms are filed) or the indications for use,which could restrict the commercial value of the product. In addition, as a condition of BLA approval, theFDA may require a risk evaluation and mitigation strategy, or REMS, to minimize any risk associated withthe product. REMS can include medication guides, communication plans for healthcare professionals andElements To Assure Safe Use, or ETASU. ETASU can include, but are not limited to, special training orcertification for prescribing or dispensing, dispensing only under certain circumstances, special monitoringand the use of patient registries. The requirement for a REMS can materially affect the potential marketand profitability of the product. Moreover, post-approval testing and surveillance to monitor the product’ssafety or efficacy may be required as a condition of approval. Once granted, product approvals may bewithdrawn if compliance with regulatory standards is not maintained or problems are identified followinginitial marketing.

Abbreviated Licensure Pathway of Biologics as Biosimilar or Interchangeable under 351(k)

The BPCIA amended the PHSA by adding section 351(k) that created an abbreviated approval pathwayfor biologics shown to be highly similar to an FDA-licensed reference biologic. Under the BPCIA, abiologic may be demonstrated to be “biosimilar” if data show that, among other things, the product is“highly similar” to a reference product. This is demonstrated through extensive analytical studies, animalstudies (when deemed necessary), and clinical trials in a sensitive patient population to confirm that“residual uncertainties” do not have clinically meaningful impact. Developing the data to satisfy FDA pre-market approval requirements typically takes many years and the actual time required may varysubstantially based upon the type, complexity and novelty of the product or disease. In addition, anapplication submitted under the 351(k) pathway must include information demonstrating that theproposed biosimilar product and reference product have the same route of administration, dosage formand the strength and the biosimilar product utilizes the same mechanism of action for the condition(s) ofuse approved in the proposed labeling to the extent the mechanism(s) of action are known for thereference product.

Biosimilarity under the BPCIA means that the biologic is highly similar to the reference productnotwithstanding minor differences in clinically inactive components and that there are no clinicallymeaningful differences between the biologic and the reference product in terms of the safety, purity andpotency of the product. Therefore, in addition to a complete CMC data submission as required for a351(a) BLA, an application submitted under section 351(k) is required to include data supporting theanalytical similarity of the proposed biosimilar product to the reference product.

If a manufacturer intends to use data from an animal study or a clinical study comparing its proposedbiosimilar product to a non-U.S.-licensed product to address, in part, the requirements under section351(k), the sponsor must provide adequate data or information to scientifically justify the relevance ofthese comparative data to an assessment of biosimilarity and establish an acceptable bridge to the U.S.-licensed reference product. The type of bridging data that is required includes data from analytical studiesthat directly compare all three products, i.e., the proposed biosimilar product, the U.S.-licensed referenceproduct and the non-U.S.-licensed comparator product, and is likely to also include bridging clinical PKand/or PD study data for all three products. FDA makes a final determination about the adequacy of thescientific justification and bridge during the review of the application.

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Moreover, the BPCIA provides for a designation of  “interchangeability” between the reference andbiosimilar products, whereby the biosimilar may be substituted for the reference product without theintervention of the healthcare provider who prescribed the reference product. After the assessment ofbiosimilarity, the higher standard of interchangeability must be demonstrated by information sufficient toshow that the proposed product is expected to produce the same clinical result as the reference productin any given patient and for a product that is administered more than once to an individual, the risk to thepatient in terms of safety or diminished efficacy of alternating or switching between the biosimilar and thereference product is no greater than the risk of using the reference product without such alternation orswitch. FDA’s implementation of the 351(k) approval pathway is still evolving, and the acceptance for filingand review of a 351(k) application is subject to the same refusals to file or approve that are describedabove for 351(a) BLAs. In addition, the FDA may accept a 351(k) application for filing but deny approvalon the basis that the sponsor has not demonstrated biosimilarity, in which case the sponsor may chooseto conduct further analytical, preclinical or clinical trials to demonstrate such biosimilarity under section351(k) or submit a BLA for licensure as a new biologic under section 351(a).

The timing of final FDA approval of a biosimilar for commercial distribution depends on a variety of factors,including whether the manufacturer of the reference product is entitled to one or more statutory exclusivityperiods, during which time the FDA is prohibited from approving, or accepting applications for, anyproduct candidates that are purportedly biosimilar to the reference product. The FDA cannot approve abiosimilar application for 12 years from the date of first licensure of the reference product. Additionally, abiosimilar product sponsor may not submit an application under the 351(k) pathway for four years fromthe date of first licensure of the reference product. “First licensure” typically means the initial date theparticular product at issue was licensed in the United States and is publicly available in the FDA’s PurpleBook. Date of first licensure does not include the date of licensure of  (and a new period of exclusivity isnot available for) a biological product if the licensure is for a supplement for the biological product or for asubsequent application by the same sponsor or manufacturer of the biological product (or licensor,predecessor in interest, or other related entity) for a change (not including a modification to the structureof the biological product) that results in a new indication, route of administration, dosing schedule, dosageform, delivery system, delivery device or strength, or for a modification to the structure of the biologicalproduct that does not result in a change in safety, purity, or potency. Therefore, one must determinewhether a subsequent application for a new product includes a modification to the structure of apreviously licensed product that results in a change in safety, purity, or potency to assess whether thelicensure of the new product is a first licensure that triggers its own period of exclusivity. Whether asubsequent application, if approved, warrants exclusivity as the “first licensure” of a biological product isdetermined on a case-by-case basis with data submitted by the sponsor.

A reference product may also be entitled to exclusivity under other statutory provisions. For example, areference product designated as an orphan drug may be entitled to seven years of exclusivity, in whichcase no product that is biosimilar to the reference product may be approved until either the end of the 12-year biologic reference product exclusivity period or the end of the seven year orphan drug exclusivityperiod, whichever occurs later. In certain circumstances, a regulatory exclusivity period can extendbeyond the life of a patent and thus block §351(k) applications from being approved on or after the patentexpiration date. In addition, the FDA may under certain circumstances extend the exclusivity period forthe reference product by an additional six months if the FDA requests, and the manufacturer undertakes,studies on the effect of its product in children, a so-called pediatric extension.

The first biosimilar product determined to be interchangeable with a reference product for any condition ofuse is also entitled to a period of exclusivity, during which time the FDA may not determine that anotherproduct is interchangeable with the reference product for any condition of use. This exclusivity periodextends until the earlier of: (i) one year after the first commercial marketing of the first interchangeableproduct; (ii) 18 months after resolution of a patent infringement suit against the applicant that submittedthe application for the first approved interchangeable product, based on a final court decision regarding allof the patents in the litigation or dismissal of the litigation with or without prejudice; (iii) 42 months afterapproval of the first interchangeable product, if a patent infringement suit instituted against the applicantthat submitted the application for the first interchangeable product is still ongoing; or (iv) 18 months afterapproval of the first interchangeable product if the applicant that submitted the application for the firstinterchangeable product has not been sued for patent infringement.

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Post-Approval Regulatory Requirements

Once a BLA is approved, a product will be subject to continuing post-approval regulatory requirementsrelating to recordkeeping, periodic reporting, testing requirements, manufacturing, distribution, advertisingand promotion and reporting of adverse experiences with the product. For instance, the FDA closelyregulates post-approval marketing and promotion concerning communications for direct-to-consumeradvertising, off-label promotion, industry-sponsored scientific and educational activities and promotionalactivities involving the internet. Failure to comply with these regulations can result in significant penalties,including the issuance of untitled and warning letters directing a company to correct deviations from FDAstandards, a requirement that future advertising and promotional materials be pre-cleared by the FDA andfederal and state civil and criminal investigations and prosecutions.

Biologics, like other pharmaceutical products, may be marketed only for the approved indications and inaccordance with the provisions of the approved conditions specified in the BLA. After approval, changesto the information submitted in the BLA may require submission to the FDA. Generally, there are threetypes of filing mechanisms to the approved application: prior approval supplement, changes beingeffected supplement and annual report. The filing type is dictated by the assessment of the potential toimpact quality, efficacy and/or safety and each holds specific review and/or approval timelines.

Adverse event reporting and submission of periodic safety reports are required following FDA approval ofa BLA. As a condition of the BLA approval, the FDA also may require additional information that mayinclude additional analytical or clinical studies and a REMS or other conditions to assess and/or monitorthe quality and safety of the approved product.

All manufacturing operations, including manufacturing, testing, packaging, labeling, storage anddistribution procedures must continue to meet cGMP requirements after approval. Product manufacturersand certain of their subcontractors are also required to register their establishments with the FDA andcertain state agencies. Registration with the FDA subjects entities to periodic inspections by the FDA,during which the agency inspects manufacturing facilities to assess compliance with cGMP. Accordingly,manufacturers must have dedicated resources in the areas of production, quality control, and qualityassurance to maintain compliance with cGMP.

Discovery of previously unknown problems with a product, including adverse events of unanticipatedseverity or frequency or with manufacturing processes or failure to comply with regulatory requirements,may result in the withdrawal of the product approval, product recall or marketing restrictions throughlabeling changes or product removals. A change in the safety profile may result in revisions to theapproved labeling to update safety information; post-market studies or clinical trials to assess new safetyrisks; or distribution restrictions or other requirements under a REMS program.

Other U.S. Healthcare Laws and Compliance Requirements

Although we currently do not have any products on the market, our current and future arrangements withhealthcare professionals, principal investigators, consultants, customers and third-party payors mayexpose us to broadly applicable healthcare regulation and enforcement by the federal government and thestates and foreign governments in which we conduct our business. These laws include, without limitation,state and federal anti-kickback, fraud and abuse, false claims, privacy and security and physiciansunshine laws and regulations.

The federal Anti-Kickback Statute prohibits, among other things, any person or entity from knowingly andwillfully offering, soliciting, receiving or providing remuneration, directly or indirectly, in cash or in kind,either to induce or award the referral of an individual, for an item or service or the purchasing,recommending or ordering of a good or service, for which payment may be made under federal healthcareprograms such as the Medicare and Medicaid programs. The Anti-Kickback Statute is subject to evolvinginterpretations. In the past, the government has enforced the Anti-Kickback Statute to reach largesettlements with healthcare companies based on, in certain cases, sham consulting and other financialarrangements with physicians. Further, the Affordable Care Act, among other things, amends the intentrequirement of the federal Anti-Kickback Statute and the criminal statute governing healthcare fraudstatutes. A person or entity no longer needs to have actual knowledge of these statutes or specific intentto violate them in order to commit a violation. In addition, the Affordable Care Act provides that the

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government may assert that a claim including items or services resulting from a violation of the federalAnti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal False Claims Actor federal civil money penalties statute. The majority of states also have anti-kickback laws that establishsimilar prohibitions and in some cases may apply to items or services reimbursed by any third-partypayor, including commercial insurers.

Additionally, the federal false claims and civil monetary penalties laws, including the civil False Claims Actprohibit, among other things, knowingly presenting or causing the presentation of a false, fictitious orfraudulent claim for payment to the U.S. government, or making a false statement to avoid, decrease, orconceal an obligation to pay money to the federal government. Actions under the False Claims Act maybe brought by the Attorney General or as a qui tam action by a private individual in the name of thegovernment. Violations of the False Claims Act can result in very significant monetary penalties and trebledamages. The federal government has used the False Claims Act, and the accompanying threat ofsignificant liability, in its investigation and prosecution of pharmaceutical and biotechnology companiesthroughout the country, for example, in connection with the promotion of products for unapproved usesand other illegal sales and marketing practices. The government has obtained multi-million and multi-billion dollar settlements under the False Claims Act in addition to individual criminal convictions underapplicable criminal statutes. Given the significant size of actual and potential settlements, it is expectedthat the government will continue to devote substantial resources to investigating healthcare providers’and manufacturers’ compliance with applicable fraud and abuse laws.

The federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, created additionalfederal criminal statutes that prohibit, among other actions, knowingly and willfully executing, orattempting to execute, a scheme to defraud any healthcare benefit program, including private third-partypayors, knowingly and willfully embezzling or stealing from a healthcare benefit program, willfullyobstructing a criminal investigation of a healthcare offense, and knowingly and willfully falsifying,concealing or covering up a material fact or making any materially false, fictitious or fraudulent statementin connection with the delivery of or payment for healthcare benefits, items or services.

HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, orHITECH, and its implementing regulations, imposes requirements regarding the privacy and security ofindividually identifiable health information, including mandatory contractual terms, for covered entities, orcertain healthcare providers, health plans, and healthcare clearinghouses, and their business associates.HITECH also increased the civil and criminal penalties that may be imposed against covered entities andbusiness associates, and gave state attorneys general new authority to file civil actions for damages orinjunctions in federal courts to enforce HIPAA.

In addition, there has been a recent trend of increased federal and state regulation of payments made tophysicians and other healthcare providers. The Affordable Care Act, among other things, via thePhysician Payments Sunshine Act, imposes reporting requirements on certain manufacturers of drugs,devices, biologics, and medical supplies for which payment is available under Medicare, Medicaid, or theChildren’s Health Insurance Program, with specific exceptions, for payments made by them to physiciansand teaching hospitals, as well as ownership and investment interests held by physicians and theirimmediate family members. Failure to submit required information to the Centers for Medicare & MedicaidServices, or CMS, may result in civil monetary penalties of up to an aggregate of  $150,000 per year (orup to an aggregate of  $1.0 million per year for “knowing failures”), for all payments, transfers of value orownership or investment interests that are not timely, accurately and completely reported in an annualsubmission. Such manufacturers must submit reports by the 90th day of each subsequent calendar year.

Certain states also mandate implementation of commercial compliance programs, impose restrictions onpharmaceutical manufacturer marketing practices and/or require the tracking and reporting of gifts,compensation and other remuneration to physicians. Additionally, analogous state and foreign laws andregulations, such as state anti-kickback and false claims laws, may apply to sales or marketingarrangements and claims involving healthcare items or services reimbursed by non-governmental thirdparty payors, including private insurers. State laws may also apply that require pharmaceutical companiesto comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant complianceguidance

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promulgated by the federal government, as well as state and foreign laws governing the privacy andsecurity of health information, many of which differ from each other in significant ways and often are notpreempted by HIPAA, thus complicating compliance efforts.

The shifting commercial compliance environment and the need to build and maintain robust systems tocomply with different compliance and/or reporting requirements in multiple jurisdictions increase thepossibility that a healthcare company may violate one or more of the requirements. If our operations arefound to be in violation of any of such laws or any other governmental regulations that apply to us, we maybe subject to penalties, including, without limitation, civil and criminal penalties, damages, fines, additionalreporting requirements and oversight if we become subject to a corporate integrity agreement or similaragreement to resolve allegations of non-compliance with these laws, the curtailment or restructuring of ouroperations, exclusion from participation in federal and state healthcare programs and imprisonment, anyof which could adversely affect our ability to operate our business and our financial results.

Healthcare Reform

The Affordable Care Act has had, and is expected to continue to have, a significant impact on thehealthcare industry. The Affordable Care Act was designed to expand coverage for the uninsured while atthe same time containing overall healthcare costs. With regard to pharmaceutical products, among otherthings, the Affordable Care Act expanded and increased industry rebates for drugs covered underMedicaid programs and made changes to the coverage requirements under the Medicare prescriptiondrug benefit. There have been judicial and Congressional challenges to certain aspects of the AffordableCare Act, and we expect there will be additional challenges and amendments to the Affordable Care Actin the future. We continue to evaluate the effect that the Affordable Care Act has on our business. Otherlegislative changes have been proposed and adopted in the United States since the Affordable Care Actwas enacted. For example, through the process created by the Budget Control Act of 2011, there areautomatic reductions of Medicare payments to providers up to 2% per fiscal year, which went into effect inApril 2013 and, following passage of the Bipartisan Budget Act of 2015, will remain in effect through 2025unless additional Congressional action is taken. In January 2013, President Obama signed into law theAmerican Taxpayer Relief Act of 2012, which, among other things, further reduced Medicare payments toseveral providers. In addition, there has been heightened governmental scrutiny recently over the mannerin which drug manufacturers set prices for their marketed products, which have resulted in severalCongressional inquiries and proposed bills designed to, among other things, bring more transparency toproduct pricing, review the relationship between pricing and manufacturer patient programs, and reformgovernment program reimbursement methodologies for drug products. In the coming years, additionallegislative and regulatory changes could be made to governmental health programs that couldsignificantly impact pharmaceutical companies and the success of our product candidates. The AffordableCare Act, as well as other federal, state and foreign healthcare reform measures that have been and maybe adopted in the future, could harm our future revenues.

International Regulation

In addition to regulations in the United States, foreign regulations also govern clinical trials, commercialsales and distribution of product candidates within their jurisdiction. The regulatory approval processvaries from country to country and the time to approval may be longer or shorter than that required forFDA approval. In the European Union, the approval of a biosimilar for marketing is based on an opinionissued by the European Medicines Agency and a decision issued by the European Commission.However, substitution of a biosimilar for the innovator is a decision that is made at the local (national) levelon a country-by-country basis. Additionally, a number of European countries do not permit the automaticsubstitution of biosimilars for the reference product. Many countries also have published their ownlegislation outlining a regulatory pathway for the development and approval of biosimilars. In some cases,countries have either adopted European guidance or are following guidance issued by the World HealthOrganization. Although similarities are apparent across these various regulatory guidances, there is alsothe potential for additional country-specific requirements.

Pharmaceutical Coverage, Pricing and Reimbursement

In the United States and other countries, sales of any products for which we receive regulatory approvalfor commercial sale will depend in part on the availability of coverage and reimbursement from third-party

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payors, including government health administrative authorities, managed care providers, private healthinsurers and other organizations. Third-party payors are increasingly examining the medical necessity andcost effectiveness of medical products and services in addition to safety and efficacy and, accordingly,significant uncertainty exists as to the reimbursement status of newly approved therapeutics. A payor’sdecision to provide coverage for a drug product does not imply that an adequate reimbursement rate willbe approved. Further, one payor’s determination to provide coverage for a drug product does not assurethat other payors will also provide coverage for the drug product. Adequate third-party reimbursementmay not be available to enable us to maintain price levels sufficient to realize an appropriate return on ourinvestment in product development. Obtaining and maintaining adequate reimbursement for our productcandidates, once approved, may be difficult. We may be required to conduct expensivepharmacoeconomic studies to justify coverage and reimbursement or the level of reimbursementcompared to existing approved biologics and other therapies. There may be significant delays in obtainingcoverage and reimbursement for newly approved drugs in the United States, and coverage may be morelimited than the indications for which the product is approved by the FDA or similar regulatory authoritiesoutside the United States. In addition, the U.S. government, state legislatures and foreign governmentshave continued implementing cost-containment programs, including price controls, restrictions oncoverage and reimbursement and requirements for substitution of generic products. Adoption of pricecontrols and cost-containment measures and adoption of more restrictive policies in jurisdictions withexisting controls and measures could further limit our net revenue and results. Decreases in third-partyreimbursement for our product candidates or a decision by a third-party payor to not cover our productcandidates could reduce physician utilization of our products and have a material adverse effect on oursales, results of operations and financial condition.

Employees

As of September 30, 2017, we had 48 full-time employees, 17 of whom were primarily engaged inresearch and development activities and 11 of whom had an M.D. or Ph.D. degree. None of ouremployees are represented by a labor union or covered by a collective bargaining agreement.

Facilities

We occupy approximately 48,000 square feet of office and laboratory space in Cranbury, New Jersey,under a lease that expires in June 2021. Additionally, we entered into a lease for approximately 82,000square feet of office and laboratory space in Cranbury, New Jersey, with lease payments thatcommenced in March 2016 and expire in March 2026.

Corporate Information

We initially incorporated in January 2010 in New Jersey as Oncobiologics, Inc., and in October 2015, wereincorporated in Delaware by merging with and into a Delaware corporation. Our headquarters arelocated at 7 Clarke Drive, Cranbury, New Jersey, 08512, and our telephone number at that location is(609) 619-3990. Our website address is www.oncobiologics.com. The information contained on, or thatcan be accessed through, our website is not part of, and is not incorporated by reference into this AnnualReport on Form 10-K.

We file electronically with the Securities and Exchange Commission our Annual Reports on Form 10-K,Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed orfurnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934. We make availableon our website at www.oncbiologics.com, free of charge, through a hyperlink on our website, copies ofthese reports, as soon as reasonably practicable after electronically filing such reports with, or furnishingthem to, the Securities and Exchange Commission. Further, a copy of this Annual Report on Form 10-K islocated at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549-2736.Information on the operation of the Public Reference Room can be obtained by calling the SEC at 1-800-SEC-0330. The SEC maintains a website that contains reports, proxy and information statements andother information regarding our filings at www.sec.gov.

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• invest in, and maintain, our development and manufacturing facilities and infrastructure;

• continue preclinical studies and clinical development of our identified product candidates;

• initiate additional preclinical, clinical or other studies for our product candidates;

• advance our programs into larger global clinical trials;

• establish a sales and marketing infrastructure to commercialize any contract development andmanufacturing services we may provide;

• change or add clinical research service providers, testing laboratories, device suppliers, legalservice providers or other vendors or suppliers;

• seek regulatory and marketing approvals for our product candidates that successfully completeclinical trials;

• establish a sales, marketing and distribution infrastructure to commercialize any products forwhich we may obtain marketing approval;

• seek to identify, assess, acquire or develop other biosimilar or other product candidates that maybe complementary to our product candidates;

• make upfront, milestone, royalty or other payments under any license agreements;

• seek to create, maintain, protect and expand our intellectual property portfolio;

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Item 1A. Risk Factors

You should consider carefully the risks and uncertainties described below, together with all of the otherinformation in this Annual Report on Form 10-K. If any of the following risks are realized, our business,financial condition, results of operations and prospects could be adversely affected. The risks describedbelow are not the only risks facing the Company. Risks and uncertainties not currently known to us or thatwe currently deem to be immaterial also may adversely affect our business, financial condition, results ofoperations and/or prospects.

Risks Related to Our Financial Condition and Capital Requirements

We have a limited operating history, have incurred significant losses and negative cash flowsfrom operations since our inception and expect to continue to incur significant losses andnegative cash flows from operations for at least the next 12 months.

We are a biopharmaceutical company with a limited operating history and we have incurred net losses ineach year since our inception in January 5, 2010, including net losses of  $38.8 million and $53.3 millionfor the years ended September 30, 2017 and 2016, respectively.

We have devoted substantially all of our financial resources to identify, develop and manufacture ourproduct candidates, including conducting, among other things, analytical characterization, processdevelopment and manufacture, formulation and clinical trials, regulatory filing and communicationactivities and providing general and administrative support for these operations. To date, we havefinanced our operations primarily through the sale of equity securities and debt financings, as well as to alimited degree, payments under our co-development and license agreements with Zhejiang HuahaiPharmaceutical Co., Ltd., or Huahai, Laboratorios Liomont, S.A. de C.V., or Liomont, IPCA LaboratoriesLimited, or IPCA and GMS Tenshi Holdings Pte, Limited or GMS Tenshi. The amount of our future netlosses will depend, in part, on our ability to generate revenue from providing contract development andmanufacturing services, the rate of our future expenditures and our ability to obtain funding through equityor debt financing or strategic licensing or co-development collaborations.

We expect to continue to incur significant expenses and increasing operating losses for at least the next12 months. We anticipate that our expenses will increase substantially if and as we:

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• engage in litigation, including patent litigation, with originator companies or others that may holdpatents to the reference products for which we are developing biosimilars, or to methods ofmanufacture or methods of use we may employ in the production of our biosimilars;

• seek to attract and retain skilled personnel;

• create additional infrastructure to support our operations as a public company and our productdevelopment and planned future commercialization efforts; and

• experience any delays or encounter issues with any of the above, including but not limited tofailed clinical trials, conflicting results, safety issues or regulatory challenges that may requirelonger follow-up of existing studies, additional major studies or additional supportive studies inorder to pursue marketing approval.

• successfully completing the expansion of our manufacturing plant;

• attracting and retaining qualified leadership and operational personnel to run the developmentand manufacturing facility and sell our services;

• our ability to attract customers to use our services; and

• our ability to compete with larger, established competitors servicing our target market.

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Our failure to become and remain profitable would decrease the value of the company and could impairour ability to raise capital, maintain our research and development efforts, expand our business orcontinue our operations. A decline in the value of our company could also cause you to lose all or part ofyour investment.

Our independent registered public accounting firm has expressed substantial doubt about ourability to continue as a going concern.

As described in their audit report, our auditors have included an explanatory paragraph that states that wehave incurred recurring losses and negative cash flows from operations since inception and have anaccumulated deficit at September 30, 2017 of  $186.2 million, $13.5 million of senior secured notes due inDecember 2018 and $4.6 million of indebtedness that is due on demand. These matters raise substantialdoubt about our ability to continue as a going concern. Our consolidated financial statements do notinclude any adjustments that might result from the outcome of this uncertainty. If we cannot continue as aviable entity, our securityholders may lose some or all of their investment in our company.

We have never generated any revenue from providing contract development and manufacturingservices and may never be profitable.

We intend to expand our BioSymphony Platform capability to provide contract development andmanufacturing services to help fund the future development of our pipeline of biosimilar productcandidates. We have not provided these services on a contract basis in the past and may not be able togenerate any revenue from providing these services. Our ability to generate revenue and achieveprofitability depends on our ability to successfully expand our facility, attract and retain qualified personneland secure contracts from potential customers. We cannot predict when we will begin generating revenuefrom providing contract services for a fee, as this depends heavily on our success in many areas,including but not limited to:

We have never generated any revenue from product sales and may never be profitable.

Although we have received upfront and milestone payments from our license and collaborationagreements, we have no products approved for commercialization and have never generated anyrevenue from product sales. Our ability to generate revenue and achieve profitability depends on ourability, alone or with strategic collaboration partners, to successfully complete the development of, andobtain the regulatory and marketing approvals necessary to commercialize, one or more of our productcandidates. We cannot predict when we will begin generating revenue from product sales, as thisdepends heavily on our success in many areas, including but not limited to:

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• completing preclinical and clinical development of our product candidates;

• developing and testing of our product candidate formulations;

• obtaining regulatory and marketing approvals for product candidates for which we completeclinical trials, including any delays as a result of petitions by reference product sponsors, orRPSs, or patent holders;

• obtaining extensions of approvals for our product candidates to other indications for which thereference product is approved and commercialized;

• developing a sustainable and scalable manufacturing process for any approved productcandidates to support clinical development and the market demand for any such approvedproduct candidates;

• launching and commercializing product candidates for which we obtain regulatory and marketingapproval, either directly or with collaboration partners;

• obtaining adequate third-party coverage and reimbursements for our products;

• obtaining market acceptance of our product candidates as viable treatment options, includingwith respect to the efficacy, safety and biosimilarity of our product candidates to the referenceproducts;

• addressing any competing technological and market developments;

• identifying, assessing and developing, or acquiring and in-licensing, new product candidates;

• negotiating favorable terms in any collaboration, licensing or other arrangements into which wemay enter;

• establishing through litigation or otherwise that we are not violating the intellectual propertyrights of innovators of reference products for which we are developing biosimilars, or that ofother third parties;

• maintaining, protecting and expanding our portfolio of intellectual property rights, includingpatents, trade secrets and know-how; and

• attracting, hiring and retaining qualified personnel.

• the size of the markets in the territories for which we gain regulatory approval;

• the number of biosimilar and other competitors in such markets;

• the market acceptance of our products, or biosimilars in general, over the reference products;

• novel therapies for the approved indications in our biosimilar market that erode uptake;

• the accepted price for the product and the ability to get reimbursement at any price;

• the nature and degree of competition from originators and other biosimilar companies (includingcompetition from large pharmaceutical companies entering the biosimilar market that may beable to gain advantages in the sale of biosimilar products based on brand recognition and/orexisting relationships with providers, pharmacy benefit managers and payors);

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Even if one or more of the product candidates is approved for commercialization, we anticipate incurringsignificant costs to commercialize any such product. Our expenses could increase beyond ourexpectations if we are required by the U.S. Food and Drug Administration, or the FDA, the EuropeanMedicines Agency, or the EMA, other regulatory agencies, domestic or foreign, or by any unfavorableoutcomes in intellectual property litigation filed against us, to change our manufacturing processes orassays or to perform clinical, preclinical or other types of studies in addition to those that we currentlyanticipate. In cases where we are successful in obtaining regulatory approvals to market one or more ofour product candidates, our revenue will be dependent, in part, upon:

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• the quality and performance of our products compared to the reference products or othercompeting products, including the relative safety and efficacy; and

• whether we own, or have partnered, the commercial rights for that territory.

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If the market for our product candidates, or our share of that market, is not as large as we expect, thenumber of indications approved by regulatory authorities is narrower than we expect or the targetpopulation for treatment is narrowed by competition, physician choice or treatment guidelines, we may notgenerate significant revenue from sales of such products to become profitable. If we are unable tosuccessfully complete development and obtain regulatory approval for our lead product candidates,namely ONS-3010, ONS-1045 and ONS-1050, our business will be harmed.

We will need to raise substantial additional funding to complete the expansion of ourmanufacturing plant and development of our product candidate pipeline. This additional fundingmay not be available on acceptable terms or at all. Failure to obtain this necessary capital whenneeded may force us to delay, limit or terminate our contract development and manufacturingand/or product development efforts or other operations.

Our plans to expand our manufacturing facility to support our efforts to begin selling contract developmentand manufacturing services will require significant additional funding to complete the expansion. We arealso currently advancing our product candidates through preclinical development, but have decided tosecure additional development partners before advancing our product candidates into and through clinicaltrials. Developing product candidates is an expensive, risky and lengthy process, and upon securingadditional development partners we expect our expenses to increase in connection with our ongoingactivities, particularly as we continue the research and development of, continue and initiate clinical trialsof, and seek marketing approval for, our product candidates, in particular ONS-3010 and ONS-1045.

As of September 30, 2017, our cash balance was $3.2 million. We expect that our current cash along withthe $21.7 million of cash received from our private placement of convertible preferred stock and warrantsin October 2017 will be sufficient to fund our operations through June 2018. We expect that we will requiresubstantial additional capital to commercialize ONS-3010 and ONS-1045, and to commence clinical trials,obtain regulatory approval for, and to commercialize, our product candidates, including our otherpreclinical product candidates and our future product candidates. However, our operating plan maychange as a result of many factors currently unknown to us, and we may need to seek additional fundssooner than planned, through public or private equity or debt financings, third-party funding, marketingand distribution arrangements, as well as other collaborations, strategic alliances and licensingarrangements, or a combination of these approaches. In any event, we will require additional capital topursue preclinical and clinical activities, pursue regulatory approval for, and to commercialize, our longerterm pipeline product candidates. Even if we believe we have sufficient funds for our current or futureoperating plans, we may seek additional capital if market conditions are favorable or if we have specificstrategic considerations.

Any additional fundraising efforts may divert our management from their day-to-day activities, which mayadversely affect our ability to develop and commercialize our product candidates. In addition, we cannotguarantee that future financing will be available in sufficient amounts or on terms acceptable to us, if at all.Moreover, the terms of any financing may negatively impact the holdings or the rights of our stockholders,and the issuance of additional securities, whether equity or debt, by us or the possibility of such issuancemay cause the market price of our securities to decline. The incurrence of indebtedness could result inincreased fixed payment obligations and we may be required to agree to certain restrictive covenants,such as limitations on our ability to incur additional debt, limitations on our ability to acquire, sell or licenseintellectual property rights and other operating restrictions that could adversely impact our ability toconduct our business. For example, our senior secured notes issued between December 2016 andMay 2017 include restrictions on our ability to incur additional indebtedness and pay stockholderdividends, among other restrictions. We could also be required to seek funds through arrangements withcollaborative partners or otherwise at an earlier stage than would be desirable and we may be required torelinquish rights to some of our technologies or product candidates or otherwise agree to termsunfavorable to us, any of which may harm our business, operating results and prospects. Even if webelieve we have sufficient funds for our current or future operating plans, we may seek additional capital ifmarket conditions are favorable or for specific strategic considerations.

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If we are unable to obtain funding on a timely basis, we may be required to significantly curtail, delay ordiscontinue one or more of our development programs or the commercialization of any productcandidates. We may also be unable to expand our operations or otherwise capitalize on our businessopportunities, as desired, which could harm our business, financial condition and results of operations.

Raising additional capital may cause dilution to our securityholders, restrict our operations orrequire us to relinquish rights to our technologies or product candidates.

Until such time, if ever, as we can generate substantial services or product revenues, we expect tofinance our cash needs through a combination of equity and debt financings, as well as selectivelycontinuing to enter into collaborations, strategic alliances and licensing arrangements. We do not currentlyhave any committed external source of funds. To the extent that we raise additional capital through thesale of equity or convertible debt securities, your ownership interest will be diluted, and the terms of thesesecurities may include liquidation or other preferences that adversely affect your rights as asecurityholder. Debt financing, if available, may involve agreements that include covenants limiting orrestricting our ability to take specific actions, such as incurring additional debt, making capital expendituresor declaring dividends, and may be secured by all or a portion of our assets.

If we raise funds by selectively continuing to enter into collaborations, strategic alliances or licensingarrangements with third parties, we may have to relinquish additional valuable rights to our technologies,future revenue streams, research programs or product candidates or to grant licenses on terms that maynot be favorable to us. If we are unable to raise additional funds through equity or debt financings whenneeded, we may be required to delay, limit, reduce or terminate our product development or futurecommercialization efforts or grant rights to develop and market product candidates that we wouldotherwise prefer to develop and market ourselves. If we are unable to raise additional funds throughcollaborations, strategic alliances or licensing arrangements, we may be required to terminate productdevelopment or future commercialization efforts or to cease operations altogether.

Risks Related to the Discovery and Development of Our Product Candidates

We are dependent on the success of our two most advanced product candidates, ONS-3010 andONS-1045. All of our other product candidates are still in various stages of preclinicaldevelopment. If we are unable to obtain regulatory approval for, or successfully commercialize,ONS-3010 and ONS-1045, our business will be harmed.

Biosimilar product development is a highly speculative undertaking and involves a substantial degree ofrisk. We have initiated preparatory activities for our confirmatory Phase 3 clinical trial of ONS-3010, ouradalimumab (Humira) biosimilar candidate, and ONS-1045, our bevacizumab (Avastin) biosimilarcandidate. It may be several years, if ever, before we initiate and complete Phase 3 clinical trials and havea product candidate ready to file for market approval with the relevant regulatory agencies. We will requireadditional funds to advance the development of ONS-3010 through Phase 3 clinical trials. Further, we willneed to raise substantial additional capital, either through equity or debt issuances or through strategiccollaborations to advance our other product candidates, including ONS-1045, into clinical trials. If weobtain regulatory approval to market a biosimilar product candidate, our future revenue will depend uponthe size of any markets in which our product candidates may receive approval and our ability to achievesufficient market acceptance, pricing, reimbursement from third-party payors and adequate market sharefor our product candidates in those markets. Even if one or more of our product candidates gain regulatoryapproval and are commercialized, we may never become profitable.

To date, we have invested substantially all of our efforts and financial resources to identify, develop andmanufacture our product candidates. Our long term success is dependent on our ability to develop, obtainregulatory approval for, and commercialize and obtain adequate third-party coverage and reimbursementfor one or more product candidates. We currently do not have any approved products and generate norevenue from sales of any products, and we may never be able to develop or commercialize a marketableproduct.

Our product candidates are in varying stages of development and will require significant additionalinvestment before we generate any revenue from product sales, if at all. Notably, we must continueclinical development, including managing preclinical and clinical manufacturing activities, obtainregulatory

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approvals, manufacture adequate commercial supplies, build a commercial organization and conductsignificant marketing efforts. We have initiated Phase 3 preparatory activities for ONS-3010 and ONS-1045. We are not permitted to market or promote any of our product candidates before we receiveregulatory approval from the FDA or comparable foreign regulatory authorities, and we may never receivesuch regulatory approval for any of our product candidates. We have not submitted any marketingapplications for our product candidates to the FDA or comparable foreign regulatory authorities and anyapplication we submit may not be approved.

We plan to seek regulatory approval to commercialize our product candidates in the United States, theEuropean Union, or the EU, and in additional foreign countries where we or our partners have commercialrights. To obtain regulatory approval, we and our collaboration partners must comply with numerous andvarying regulatory requirements of such countries regarding safety, efficacy, chemistry, manufacturing andcontrols, clinical trials, commercial sales and pricing and distribution of our product candidates. Even if weare successful in obtaining approval in one jurisdiction, we cannot ensure that we will obtain approval inany other jurisdictions. If we are unable to obtain approval for our product candidates in multiplejurisdictions, our revenue and results of operations could be negatively impacted.

We cannot be certain that any of our product candidates will be successful in clinical trials or receiveregulatory approval. Further, our product candidates may not receive regulatory approval even if they aresuccessful in clinical trials. If we do not receive regulatory approvals for our product candidates, we maynot be able to continue our operations.

The development, manufacture and commercialization of biosimilar products under various globalregulatory pathways pose unique risks. To our knowledge, there have been only nine biosimilarproduct applications approved by the FDA under the 351(k) pathway to date.

United States Regulatory Framework for Biosimilars

We and our collaboration partners intend to pursue market authorization globally. In the United States, anabbreviated pathway for approval of biosimilar products was established by the Biologics PriceCompetition and Innovation Act of 2009, or BPCIA, enacted on March 23, 2010, as part of the PatientProtection and Affordable Care Act. The BPCIA established this abbreviated pathway under section351(k) of the Public Health Service Act, or PHSA. Subsequent to the enactment of the BPCIA, the FDAissued draft guidance regarding the demonstration of biosimilarity as well as the submission and review ofbiosimilar applications. To our knowledge, there have been only nine mAb biosimilar product applicationsapproved by the FDA under the 351(k) pathway to date. Moreover, market acceptance of biosimilarproducts in the United States is still in its infancy and continues to evolve.

Numerous states are considering or have already enacted laws that regulate or restrict the substitution bystate pharmacies of biosimilars for reference products already licensed by the FDA. Market success ofbiosimilar products will depend on demonstrating to patients, physicians, payors and relevant authoritiesthat such products are similar in quality, safety and efficacy as compared to the reference product.

The BPCIA requires a biosimilar applicant to demonstrate biosimilarity with respect to a reference productthat has been approved by FDA in the United States. Biosimilars approved in the EU and other non-U.S.jurisdictions may not be approved in the United States without additional “bridging” studiesdemonstrating biosimilarity to an FDA-approved reference product. Biosimilars approved in the UnitedStates may also not be approved in foreign jurisdictions without additional bridging studies. Therequirements for such bridging studies are not well defined, which may delay the global marketing of ourproduct candidates.

We will continue to analyze and incorporate into our biosimilar development plans any final regulations orguidance issued by the FDA, pharmacy substitution policies enacted by state governments and otherapplicable requirements established by relevant authorities. The costs of development and approval,along with the probability of success for our biosimilar product candidates, will be dependent uponapplication of any laws and regulations issued by the relevant regulatory authorities.

Biosimilar products may also be subject to extensive patent clearances and patent infringement litigation,which may delay and could prevent the commercial launch of a product. Moreover, the BPCIA prohibitsthe FDA from accepting an application for a biosimilar candidate to a reference product within four years

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of the reference product’s licensure by the FDA. In addition, the BPCIA provides reference biologics with12 years of exclusivity from the date of their licensure, during which time the FDA cannot approve anyapplication for a biosimilar candidate to the reference product. For example, the FDA would not be able togrant approval of any application submitted for a bevacizumab (Avastin) biosimilar or a trastuzumab(Herceptin) biosimilar, until 12 years after the original biologics license application or the BLAs, for thesedrugs were approved, which occurred on February 26, 2004 in the case of Avastin and September 25,1998 in the case of Herceptin. However, in the past, legislative proposals have been introduced to cut this12-year period of exclusivity down to seven years and prohibit additional periods of exclusivity due tominor changes in product formulations, a practice often referred to as “evergreening.” In addition, theFederal Circuit has recently interpreted the BPCIA as requiring (under certain circumstances) thebiosimilar applicant to give the RPS 180 days’ notice of commercial launch after receiving approval fromFDA. This could result in an additional six months of market exclusivity for the reference product. Patentinfringement litigation under the BPCIA may also be complex and time-consuming. RPSs may seekpreliminary injunctions barring launch during the pendency of such litigation, which could substantiallydelay market entry.

The BPCIA is complex and only beginning to be interpreted and implemented by the FDA and courts. Asa result, its ultimate impact, implementation and meaning are evolving and subject to significantuncertainty. Future implementation decisions by the FDA or court decisions could result in delays in thedevelopment or commercialization of our product candidates or increased costs to assure regulatorycompliance and could adversely affect our operating results by restricting or significantly delaying ourability to market new biosimilar products.

Regulatory Framework for Biosimilars Outside the United States

In 2004, the European Parliament issued legislation allowing the approval of biosimilar therapeutics. Sincethen, the European Commission has granted marketing authorizations for biosimilars pursuant to a set ofgeneral and product class-specific guidelines for biosimilar approvals issued over the past few years.Because of their extensive experience in the review and approval of biosimilars, the EU has more finalguidelines than the FDA, including specific product data requirements needed to support approval.

Generally speaking, under current EU regulations, an application for regulatory approval of a biosimilardrug cannot be submitted in the EU until expiration of an eight year data exclusivity period for thereference product, measured from the date of the reference product’s initial marketing authorization.Furthermore, once approved, the biosimilar cannot be marketed until expiration of a 10-year periodfollowing the initial marketing authorization of the reference product, such 10-year period being extendibleto 11 years if the reference product received approval of an additional therapeutic indication within the firsteight years following its initial marketing authorization, representing a significant clinical benefit incomparison with existing therapies. However, we understand that reference products approved prior toNovember 20, 2005 (which would include, for example, Humira, approved in the EU on August 9, 2003)are subject to a 10-year period of data exclusivity. While the data exclusivity periods for Humira have nowexpired in the EU, the reference product is presently still subject to unexpired patents.

In the EU, the approval of a biosimilar for marketing is based on an opinion issued by the EMA and adecision issued by the European Commission. Therefore, the marketing approval will cover the entireEuropean Economic Area, or EEA. However, substitution of a biosimilar for the reference product is adecision that is made at the Member State level.

Additionally, a number of countries do not permit the automatic substitution of biosimilars for the referenceproduct. Therefore, even if we obtain marketing approval for the entire EEA, we may not receivesubstitution in one or more European nations, thereby restricting our ability to market our products inthose jurisdictions.

Other regions, including Canada, Mexico, China, Japan and Korea, also have their own legislationoutlining a regulatory pathway for the approval of biosimilars. In some cases, other countries have eitheradopted European guidance (Singapore and Malaysia) or are following guidance issued by the WorldHealth Organization (Cuba and Brazil). While there is overlap in the regulatory requirements acrossregions, there are also some areas of non-overlap. Additionally, we cannot predict whether countries thatwe may wish to

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• the data collected from clinical trials of our product candidates may not be sufficient to supportthe submission of a BLA, a biosimilar product application under the 351(k) pathway of thePHSA, a biosimilar marketing authorization under Article 6 of Regulation (EC) No. 726/2004and/or Article 10(4) of Directive 2001/83/EC in the EEA or other submission or to obtainregulatory approval in the United States, the EEA or elsewhere;

• the FDA, EMA or other foreign regulatory authorities may disagree with the design orimplementation of our clinical trials;

• the population studied in the clinical trial may not be sufficiently representative to assure safetyin the full population for which we seek approval;

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market in, which do not yet have an established or tested regulatory framework, could decide to issueregulations or guidance and/or adopt a more conservative viewpoint than other regions. Therefore, it ispossible that even if we obtain agreement from one health authority to an accelerated or optimizeddevelopment plan, we will need to defer to the most conservative view to ensure global harmonization ofthe development plan. Also, for regions where regulatory authorities do not yet have sufficient experiencein the review and approval of a biosimilar product, these authorities may rely on the approval from anotherregion such as the United States or the EU, which could delay our approval in that region.

Due to our limited resources and access to capital, we have, and will continue to need to,prioritize development of certain product candidates; and these decisions may prove to havebeen wrong and may harm our business.

Because we have limited resources and access to capital to fund our operations, we must decide whichproduct candidates to pursue and the amount of resources to allocate to each. We are currently seekingadditional development or licensing partners for the development of our mAb biosimilars and, in particular,ONS-3010, ONS-1045 and ONS-1050. Our decisions concerning the allocation of research, collaboration,management and financial resources toward particular product candidates or therapeutic areas may notlead to the development of viable commercial products and may divert resources away from betteropportunities. Similarly, our potential decisions to delay, terminate or collaborate with third parties inrespect to certain product development programs may also prove not to be optimal and could cause us tomiss valuable opportunities. If we make incorrect determinations regarding the market potential of ourproduct candidates or misread trends in the biosimilar industry, our business, financial condition andresults of operations could be harmed.

The evolving regulatory approval processes of the FDA, EMA and comparable foreign authoritiesare lengthy, time-consuming, rigorous and inherently unpredictable. If we and our collaborationpartners are ultimately unable to obtain regulatory approval for our product candidates, ourbusiness will be harmed.

The research, development, testing, manufacturing, labeling, packaging, approval, promotion, advertising,storage, marketing, distribution, post-approval monitoring and reporting and export and import of biologicproducts are subject to extensive regulation by the FDA and other regulatory authorities in the UnitedStates, by the EMA and Competent Authorities in the EEA, and by other regulatory authorities in othercountries, where regulations differ from country to country. We are not permitted to market our productcandidates in the United States until we receive approval from the FDA, or in the EEA until we receiveEuropean Commission or EEA Competent Authority approvals.

The exact amount of time required to obtain approval by the FDA and comparable foreign authorities isunpredictable, may take years following the completion of clinical trials and depends upon numerousfactors, which may not be within our control. In addition, approval policies, regulations or the type andamount of clinical data necessary to gain approval may change during the course of a product candidate’sclinical development and may vary among jurisdictions, which could cause delays in the approval or thedecision not to approve an application. We have not obtained regulatory approval for any of our productcandidates, and it is possible that none of our current or future product candidates will ever obtainregulatory approval.

Applications for our product candidates could fail to receive regulatory approval for many reasons,including but not limited to the following:

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• the FDA, EMA or other foreign regulatory authorities may disagree with our interpretation of datafrom analytical and bioanalytical studies, preclinical studies or clinical trials;

• we may be unable to demonstrate to the FDA, EMA or other foreign regulatory authorities thatour product candidate is highly similar to biological reference products already licensed by theregulatory authority pursuant to marketing applications, notwithstanding minor differences inclinically inactive components;

• we may be unable to extrapolate or obtain approval of other indication for which the referenceproduct is approved by the FDA, EMA or other foreign regulatory authority to other indications forwhich the reference product is approved;

• we may be unable to obtain an interchangeability designation by the FDA or other foreignregulatory authority for our product candidate, which may deter physicians, providers and payorsfrom prescribing our product candidates;

• the FDA or comparable foreign regulatory authorities may fail to deem our manufacturingprocesses, test procedures and specifications or our manufacturing facilities adequate forapproval; and

• the approval policies or regulations of the FDA, EMA or other foreign regulatory authorities maysignificantly change in a manner rendering our clinical data insufficient for approval.

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This lengthy approval process, as well as the unpredictability of the results of clinical trials, may result inour failure to obtain regulatory approval to market any of our product candidates, which would significantlyharm our business. Moreover, any delays in the commencement or completion of clinical testing couldsignificantly impact our product development costs and commercial return potential, and could result inthe need for additional financing.

In addition, if we change the regulatory pathway through which we intend to seek approval of any of ourproduct candidates, or alter their composition or method of manufacturing, we may have to conductadditional clinical trials, which may delay our ability to submit a marketing application for the product.

Even if we or our collaboration partners were to obtain approval for any of our product candidates,regulatory agencies may limit the scope of such approval for fewer or more limited indications than werequest, may grant approval contingent on the completion of costly additional clinical trials or mayapprove a product candidate with a label that does not include the labeling claims necessary or desirablefor the successful commercialization of that product candidate. Any of the foregoing could harm thecommercial prospects for our product candidates.

If we are not able to demonstrate the biosimilarity of our product candidates to the satisfaction ofregulatory authorities, we will not obtain regulatory approval for commercial sale of our productcandidates and our future results of operations will be adversely affected.

Our future results of operations depend heavily on our ability to obtain regulatory approval for and tocommercialize our biosimilar product candidates. To obtain regulatory approval for the commercial sale ofthese product candidates, we will be required to demonstrate to the satisfaction of regulatory authorities,among other relevant groups such as physicians and payors, that our biosimilar product candidates arehighly similar to biological reference products already licensed by the regulatory authority pursuant tomarketing applications, notwithstanding minor differences in clinically inactive components, and that thereare no clinically meaningful differences as compared to the marketed reference products in terms of thesafety, purity and potency of such reference products. Each jurisdiction may apply different criteria toassess biosimilarity, based on a preponderance of the data that can be interpreted subjectively in somecases.

Although we have had several interactions with both the FDA and EMA for our lead product candidatesand will continue to meet with regulators as necessary, we cannot be assured that results from ourscientific studies will meet the rigorous requirements for approval. In addition, we cannot be certain ofpotential future changes to regulatory requirements that may require additional work before approval canbe granted. It is also uncertain if regulatory authorities will grant the full reference label to our biosimilarproduct

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• inability to generate sufficient preclinical, toxicology or other in vivo or in vitro data to support theinitiation of human clinical trials;

• delays in reaching a consensus with regulatory agencies on study design;

• delays in reaching agreement on acceptable terms with prospective contract researchorganizations, or CROs, and clinical trial sites, the terms of which can be subject to extensivenegotiation and may vary significantly among different CROs and clinical trial sites;

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candidates when they are approved. For example, an infliximab (Remicade ) biosimilar molecule wasapproved in the EU for the full reference label but did not receive the full reference label when approvedin Canada. A similar outcome could occur with respect to one or more of our product candidates, whichwould have a negative impact on our ability to commercialize our products.

The structure of complex mAb biologics is inherently variable and highly dependent on theprocesses and conditions used to manufacture them. If we are unable to develop manufacturingprocesses that achieve a requisite degree of biosimilarity to the reference product, and within arange of variability considered acceptable by regulatory authorities, we may not be able to obtainregulatory approval for our products.

MAb biologics are inherently heterogeneous and their structures are highly dependent on the cell line andproduction process conditions. Products from one production facility can differ within an acceptable rangefrom those produced in another facility. Similarly, physicochemical differences can also exist amongdifferent lots produced within a single facility. The physicochemical complexity and size of biologictherapeutics create significant technical and scientific challenges in the context of their replication asbiosimilar products.

The inherent variability in the protein structure from one production lot to another is a fundamentalconsideration with respect to establishing biosimilarity to a reference product to support regulatoryapproval requirements. For example, the glycosylation of the protein, meaning the manner in which sugarmolecules are attached to the protein when it is produced, can be critical to the half-life, efficacy,immunogenicity and safety of the therapeutic and is therefore a key consideration for biosimilarity. Also,small changes in the structure or folding of the protein backbone of a mAb can impact its affinity,specificity and immunogenicity. Defining and understanding the variability of a reference product in orderto match its glycosylation profile and other critical quality attributes requires significant skill in cell biology,protein purification and analytical protein chemistry. Furthermore, manufacturing proteins with reliable andconsistent product quality at scale is challenging and highly dependent on the skill of the cell biologist andprocess scientist.

There are extraordinary technical challenges in developing complex mAb biologics that not only mustachieve an acceptable degree of similarity to the reference product in terms of structural characteristics,but also the ability to develop manufacturing processes that can replicate the necessary structuralcharacteristics within an acceptable range of variability sufficient to satisfy regulatory authorities.

Given the challenges caused by the inherent variability in protein production, we may not be successful indeveloping our product candidates if regulators conclude that we have not achieved a sufficient level ofbiosimilarity to the reference product, or that the processes we use to manufacture our product candidatesare unable to produce our product candidates within an acceptable range of variability. These challengesmay result in a failure to obtain regulatory approval for our products and could harm our business.

Clinical drug development is a lengthy and expensive process and we may encounter substantialdelays in our clinical trials or may fail to demonstrate safety and efficacy to the satisfaction ofapplicable regulatory authorities.

Before obtaining marketing approval from regulatory authorities for the sale of our product candidates, weand our collaboration partners must conduct clinical trials to demonstrate the safety and efficacy of theproduct candidates in humans.

We cannot guarantee that any clinical trials will be conducted as planned or completed on schedule, if atall. A failure of one or more clinical trials can occur at any stage of testing, and our future clinical trials maynot be successful. Events that may prevent successful or timely completion of clinical developmentinclude but are not limited to:

®

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• delays in obtaining required Institutional Review Board, or IRB, approval at each clinical trial site;

• imposition of a clinical hold by regulatory agencies, after review of an investigational new drug,or IND, application or amendment or equivalent filing, or an inspection of our clinical trialoperations or trial sites, or as a result of adverse events reported during a clinical trial;

• delays in recruiting suitable patients to participate in our clinical trials;

• difficulty collaborating with patient groups and investigators;

• failure by our CROs, other third parties or us to adhere to clinical trial requirements;

• failure to perform in accordance with the FDA’s good clinical practice, or GCP, requirements orapplicable regulatory guidelines in other countries;

• delays in having subjects complete participation in a study or return for post-treatment follow-up,or subjects dropping out of a study;

• occurrence of adverse events associated with the product candidate that are viewed to outweighits potential benefits;

• changes in regulatory requirements and guidance that require amending or submitting newclinical protocols;

• the cost of clinical trials of our product candidates being greater than we anticipate;

• inability to obtain sufficient quantities of reference product for the comparator arm of our studies;

• clinical trials of our product candidates producing negative or inconclusive results, which mayresult in us deciding or regulators requiring us to conduct additional clinical trials or abandonproduct development programs; and

• delays in manufacturing, testing, releasing, validating or importing/exporting and/or distributingsufficient stable quantities of our product candidates and reference products for use in clinicaltrials or the inability to do any of the foregoing.

• finding eligible patients willing to participate in clinical trials for biosimilar drugs;

• finding investigators willing to participate in biosimilar trials and who have access to appropriatepatients;

• accommodating changes to reference product formulations during the conduct of clinical trials;

• competition for sites and patients where new and competitive therapies are being tested;

• designing, enrolling and completing a clinical trial to demonstrate biosimilarity and, whereappropriate, interchangeability; and

• working with investigators that are not as experienced in conducting biosimilarity orinterchangeability trials, or with the regulations applicable to such clinical trials.

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Any inability to successfully complete preclinical studies and clinical development could result in additionalcosts to us or impair our ability to generate revenue. In addition, if we make manufacturing or formulationchanges to our product candidates, we may need to conduct additional clinical trials to bridge our modifiedproduct candidates to earlier versions.

Clinical development of biosimilars is different and can be more complex than clinicaldevelopment programs for the reference products.

Clinical trials to show comparability of a biosimilar candidate to an approved reference product are newand differ from the clinical trials to gain approval for a new biologic. This may lead to difficulties indesigning, initiating and enrolling trials for our product candidates. Some of these difficulties include:

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These requirements and difficulties may lead to data quality issues or an inability to start or finish a clinicaltrial, or may lead to significant delays, which in turn may lead to the inability to produce data for approvalof our biosimilar product candidates.

The results of previous clinical trials may not be predictive of future results, and the results of ourcurrent and planned clinical trials may not satisfy the requirements of the FDA, EMA or otherforeign regulatory agencies.

Clinical failure can occur at any stage of clinical development. Clinical trials may produce negative orinconclusive results, and we or any of our current and future collaborators may decide, or regulators mayrequire us, to conduct additional clinical or preclinical testing. We will be required to demonstrate withsubstantial evidence through well-controlled clinical trials that our product candidates are as safe andeffective for use in a specific patient population as the respective reference products before we can seekregulatory approvals for their commercial sale. Success in early clinical trials does not mean that futurelarger registration clinical trials will be successful because product candidates in later-stage clinical trialsmay fail to demonstrate equivalent safety and efficacy to the satisfaction of the FDA, EMA and otherforeign regulatory agencies despite having progressed through initial clinical trials. Product candidatesthat have shown promising results in early clinical trials may still fail in subsequent confirmatory clinicaltrials. Similarly, the outcome of preclinical testing and early clinical trials may not be predictive of thesuccess of later clinical trials, and interim results of a clinical trial do not necessarily predict final results. Anumber of companies in the pharmaceutical industry, including those with greater resources andexperience than us, have suffered significant setbacks in advanced clinical trials, even after obtainingpromising results in earlier clinical trials.

In addition, the design of a clinical trial can determine whether its results will support approval of aproduct and flaws in the design of a clinical trial may not become apparent until the clinical trial is welladvanced. We may be unable to design and execute a clinical trial to support regulatory approval. Insome instances, there can be significant variability in safety or efficacy results between different trials ofthe same product candidate due to numerous factors, including but not limited to changes in trialprotocols, differences in size and type of the patient populations, adherence to the dosing regimen andthe rate of dropout among clinical trial participants.

Further, our product candidates may not be approved even if they achieve their primary endpoints inPhase 3 clinical trials or registration trials. The FDA, EMA and other foreign regulatory agencies maydisagree with our trial design and our interpretation of data from preclinical studies and clinical trials. Inaddition, any of these regulatory authorities may change the requirements for the approval of a productcandidate even after reviewing and providing comments or advice on a protocol for a Phase 3 clinical trialthat has the potential to result in FDA or other agencies’ approval. We initially intend to seek approval forONS-3010 for the treatment of plaque psoriasis and ONS-1045 for the treatment of non-squamous, non-small cell lung cancer. We have not yet determined the indication for which we will seek initial approval forONS-1050 or our preclinical biosimilar product candidates. We plan to extrapolate to all indications in theapproved product labeling of the reference product based on the sensitive population agreed by the FDAand EMA in the confirmatory clinical study. During review of the registration application, our justificationfor the extrapolation may not be accepted. Any of the regulatory authorities may approve a productcandidate for fewer indications than we request or may grant approval contingent on the performance ofcostly post-marketing clinical trials. In addition, the FDA, EMA and other foreign regulatory agencies maynot approve the additional indication extrapolations that we believe would be necessary or desirable forthe successful commercialization of our product candidates.

Our product candidates may cause undesirable side effects or have other properties that coulddelay or prevent their regulatory approval, limit the commercial profile of an approved label orresult in significant negative consequences following marketing approval, if granted.

As with most pharmaceutical products, use of our product candidates could be associated with sideeffects or adverse events, which can vary in severity and frequency. Side effects or adverse eventsassociated with the use of our product candidates may be observed at any time, including in clinical trialsor when a product is commercialized. Undesirable side effects caused by our product candidates couldcause us or regulatory authorities to interrupt, delay or halt clinical trials and could result in a morerestrictive label or the delay or

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• regulatory authorities may withdraw approvals of such product;

• regulatory authorities may require additional warnings on the label;

• we may be required to create a Risk Evaluation and Mitigation Strategy plan, which couldinclude a medication guide outlining the risks of such side effects for distribution to patients, acommunication plan for healthcare providers and/or other elements to assure safe use;

• we could be sued and held liable for harm caused to patients; and

• our reputation may suffer.

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denial of regulatory approval by the FDA or other foreign authorities. Results of our studies could reveal ahigh and unacceptable severity and prevalence of side effects, toxicity or other safety issues, and couldrequire us to perform additional studies or halt development or sale of these product candidates or exposeus to product liability lawsuits that will harm our business. In such an event, we may be required byregulatory agencies to conduct additional animal or human studies regarding the safety and efficacy of ourproduct candidates that we have not planned or anticipated or our studies could be suspended orterminated, and the FDA or comparable foreign regulatory authorities could order us to cease furtherdevelopment of or deny or withdraw approval of our product candidates for any or all targeted indications.There can be no assurance that we will resolve any issues related to any product-related adverse eventsto the satisfaction of the FDA or any other regulatory agency in a timely manner, if ever, which could harmour business, prospects and financial condition.

Additionally, product quality characteristics have been shown to be sensitive to changes in processconditions, manufacturing techniques, equipment or sites and other related considerations, and as such,any manufacturing process changes we implement prior to or after regulatory approval could impactproduct safety.

Additionally, if one or more of our product candidates receives marketing approval, and we or others lateridentify undesirable side effects caused by such products, a number of potentially significant negativeconsequences could result, including but not limited to:

Any of these events could prevent us from achieving or maintaining market acceptance of the particularproduct candidate, if approved, and could significantly harm our business, results of operations andprospects.

If we receive approval, regulatory agencies including the FDA, EMA and other foreign regulatory agencyregulations require that we report certain information about adverse medical events if those products mayhave caused or contributed to those adverse events. The timing of our obligation to report would betriggered by the date we become aware of the adverse event as well as the nature of the event. We mayfail to report adverse events we become aware of within the prescribed timeframe. We may also fail toappreciate that we have become aware of a reportable adverse event, especially if it is not reported to usas an adverse event or if it is an adverse event that is unexpected or removed in time from the use of ourproducts. If we fail to comply with our reporting obligations, the FDA, EMA or other foreign regulatoryagencies could take action including but not limited to criminal prosecution, the imposition of civilmonetary penalties, seizure of our products or delay in approval or clearance of future products.

If other biosimilars of adalimumab (Humira), bevacizumab (Avastin) or trastuzumab (Herceptin)are determined to be interchangeable and our biosimilar product candidates for these referenceproducts are not, our business would suffer.

The FDA or other relevant regulatory authorities may determine that a proposed biosimilar product is“interchangeable” with a reference product, meaning that the biosimilar product may be substituted for thereference product without the intervention of the healthcare provider who prescribed the referenceproduct, if the application includes sufficient information to show that the product is biosimilar to thereference product and that it can be expected to produce the same clinical result as the reference productin any given patient. If the biosimilar product may be administered more than once to a patient, theapplicant must demonstrate that the risk in terms of safety or diminished efficacy of alternating orswitching between the biosimilar product and the reference product is not greater than the risk of usingthe reference product

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without such alternation or switch. To make a final determination of biosimilarity or interchangeability,regulatory authorities may require additional confirmatory information beyond what we plan to initiallysubmit in our applications for approval, such as more in-depth analytical characterization, animal testingor further clinical trials. Provision of sufficient information for approval may prove difficult and expensive.

We cannot predict whether any of our biosimilar product candidates will meet regulatory authorityrequirements for approval as a biosimilar product or as an interchangeable product in any jurisdiction.Furthermore, legislation governing interchangeability could differ by jurisdiction on a state or national levelworldwide.

The concept of  “interchangeability” is important in the U.S. market, potentially the largest global marketfor biosimilars, because the first biosimilar determined to be interchangeable with a particular referenceproduct for any condition of use is eligible for a period of market exclusivity with respect to otherinterchangeable biosimilars. The FDA may not designate a second or subsequent biosimilar product asinterchangeable with the reference product until the earlier of: (1) one year after the first commercialmarketing of the first interchangeable product; (2) 18 months after resolution of a patent infringement suitinstituted under 42 U.S.C. § 262(l)(6) against the applicant that submitted the application for the firstinterchangeable product; (3) 42 months after approval of the first interchangeable product, if a patentinfringement suit instituted under 42 U.S.C. § 262(l)(6) against the applicant that submitted the applicationfor the first interchangeable product is still ongoing; or (4) 18 months after approval of the firstinterchangeable product if the applicant that submitted the application for the first interchangeableproduct has not been sued under 42 U.S.C. § 262(l)(6). Thus, a determination that another company’sproduct is interchangeable with the reference biologic before we obtain such a designation may delay thepotential determination that our products are interchangeable with the reference product, which couldharm our results of operations and delay, prevent or limit our ability to generate revenue.

If product liability lawsuits are brought against us, we may incur substantial liabilities and may berequired to limit commercialization of our current or future product candidates, and our existinginsurance coverage may not be sufficient to satisfy any liability that may arise.

Drug-related side effects could affect patient recruitment for clinical trials, the ability of enrolled patients tocomplete our studies or result in potential product liability claims. We currently carry product liabilityinsurance in the amount of  $10.0 million per product candidate and we are required to maintain productliability insurance pursuant to certain of our license agreements. We may not be able to maintaininsurance coverage at a reasonable cost or in sufficient amounts to protect us against losses due toliability. A successful product liability claim or series of claims brought against us could negatively impactour results of operations and business. In addition, regardless of merit or eventual outcome, productliability claims may result in impairment of our business reputation, withdrawal of clinical trial participants,costs due to related litigation, distraction of management’s attention from our primary business, initiation ofinvestigations by regulators, substantial monetary awards to patients or other claimants, the inability tocommercialize our product candidates and decreased demand for our product candidates, if approved forcommercial sale. Furthermore, we may also not be able to take advantage of limitations on product liabilitylawsuits that apply to generic drug products, which could increase our exposure to liability for productsdeemed to be dangerous or defective.

Failure to obtain regulatory approval in any targeted jurisdiction would prevent us from marketingour products to a larger patient population and reduce our commercial opportunities.

We and our collaboration partners have not initiated marketing efforts in any jurisdiction. Subject toproduct approvals and relevant patent expirations, we or our collaboration partners intend to first marketour products in the EU and Japan followed by the United States.

In order to market our products in the EU, the United States and other jurisdictions, we and ourcollaboration partners must obtain separate regulatory approvals and comply with numerous and varyingregulatory requirements. The EMA is responsible for the regulation and recommendation for approval ofhuman medicines in the EU. This procedure results in a single marketing authorization that is valid in allEU countries, as well as in Iceland, Liechtenstein and Norway. The time required to obtain approvalabroad may differ from that required to obtain FDA approval. The foreign regulatory approval process mayinclude

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• issue untitled and warning letters;

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all of the risks associated with obtaining FDA approval and we may not obtain foreign regulatoryapprovals on a timely basis, if at all. Approval by the FDA does not ensure approval by regulatoryauthorities in other countries, and approval by one foreign regulatory authority does not ensure approvalby regulatory authorities in other foreign countries or by the FDA. We or our collaboration partners maynot be able to file for regulatory approvals and may not receive necessary approvals to commercialize ourproducts within the EU, the United States or in other jurisdictions. Failure to obtain these approvals wouldharm our business, financial condition and results of operations.

Approval in the United States requires a demonstration of biosimilarity to a U.S.-approved referenceproduct. EMA approval requires a demonstration of biosimilarity to an EMA-approved reference product.Accordingly, for our global clinical program, bridging studies will be required in order to use the clinicaltesting in one jurisdiction in another. The bridging studies must demonstrate that the data demonstratingbiosimilarity against the EMA-approved reference product are sufficient to demonstrate biosimilarity to theFDA-approved reference product, and vice versa. The need for such bridging studies may delay or limitour ability to market our products globally.

Even if we obtain regulatory approval for a product candidate, our products will remain subject toregulatory scrutiny.

If our product candidates are approved, they will be subject to ongoing regulatory requirements formanufacturing, labeling, packaging, storage, advertising, promotion, sampling, record-keeping, conduct ofpost-marketing studies and submission of safety, efficacy and other post-market information, includingboth federal and state requirements in the United States and requirements of comparable foreignregulatory authorities.

Manufacturers and manufacturing facilities are required to comply with extensive FDA, and comparableforeign regulatory authority, requirements, including ensuring that quality control and manufacturingprocedures conform to current Good Manufacturing Practices, or cGMP, regulations. As such, we will besubject to continual review and inspections to assess compliance with cGMP and adherence tocommitments made in any non-disclosure agreement, BLA or marketing authorization application, orMAA. Accordingly, we and our collaborators and suppliers must continue to expend time, money andeffort in all areas of regulatory compliance, including manufacturing, production and quality control.

Any regulatory approvals that we or our collaboration partners receive for our product candidates may besubject to limitations on the approved indicated uses for which the product may be marketed or to theconditions of approval or may contain requirements for potentially costly additional clinical trials andsurveillance to monitor the safety and efficacy of the product candidate. We will be required to reportcertain adverse reactions and production problems, if any, to the FDA and comparable foreign regulatoryauthorities. Any new legislation addressing drug safety issues could result in delays in productdevelopment or commercialization or increased costs to assure compliance. We will have to comply withrequirements concerning advertising and promotion for our products. Promotional communications withrespect to prescription drugs are subject to a variety of legal and regulatory restrictions and must beconsistent with the information in the product’s approved label. As such, we are not allowed to promoteour products for indications or uses for which they do not have approval. If our product candidates areapproved, we must submit new or supplemental applications and obtain approval for certain changes tothe approved products, product labeling or manufacturing process. We could also be asked to conductpost-marketing clinical trials to verify the safety and efficacy of our products in general or in specificpatient subsets. An unsuccessful post-marketing study or failure to complete such a study could result inthe withdrawal of marketing approval.

If a regulatory agency discovers previously unknown problems with an approved product, such asadverse events of unanticipated severity or frequency or problems with our manufacturing facilities ordisagrees with the promotion, marketing or labeling of a product, such regulatory agency may imposerestrictions on that product or us, including requiring withdrawal of the product from the market. If we failto comply with applicable regulatory requirements, a regulatory agency or enforcement authority may,among other things:

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• impose civil or criminal penalties;

• suspend or withdraw regulatory approval;

• suspend any of our ongoing clinical trials;

• refuse to approve pending applications or supplements to approved applications submitted byus;

• impose restrictions on our operations, including closing our manufacturing facilities; or

• seize or detain products or require a product recall.

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Any government investigation of alleged violations of law could require us to expend significant time andresources in response and could generate negative publicity. Any failure to comply with ongoingregulatory requirements may significantly and adversely affect our ability to commercialize and generaterevenue from our products. If regulatory sanctions are applied or if regulatory approval is withdrawn, thevalue of our company and our operating results will be negatively impacted.

Adverse events involving a reference product, or other biosimilars of such reference product,may adversely affect our business.

In the event that use of a reference product, or other biosimilar for such reference product, results inunanticipated side effects or other adverse events, it is likely that our biosimilar product candidate will beviewed comparably and may become subject to the same scrutiny and regulatory sanctions as thereference product or other biosimilar, as applicable. Discovery of such unanticipated side effects or otheradverse events in a reference product may result in changes to its approved labeling or indications, oreven withdrawal of the reference product from the market. Additionally, if a biosimilar is approved for thesame reference product as one of our product candidates and unanticipated side effects or other adverseevents are associated with such third-party biosimilar in the future, the development and market for ourproduct candidate could be adversely affected.

As a result, we may become subject to regulatory supervisions, clinical holds, product recalls or otherregulatory actions for matters outside of our control that affect the reference product, or other biosimilar,as applicable, if and until we are able to demonstrate to the satisfaction of our regulators that ourbiosimilar product candidate is not subject to the same issues leading to the regulatory action as thereference product or other biosimilar, as applicable.

We may elect to seek licensure of our biosimilar products under the 351(a) (novel biologic)approval pathway instead of the 351(k) (biosimilar) approval pathway. This approval pathway mayrequire us to undertake more expensive clinical trials and may present greater risk of failure thanthe 351(k) (biosimilar) approval pathway.

While we have elected to proceed under the 351(k) (biosimilar) approval pathway for ONS-3010, ONS-1045 and ONS-1050, we may elect for future products to pursue a 351(a) (novel biologic) approvalpathway for a variety of clinical, regulatory and business reasons. The 351(a) (novel biologic) approvalpathway generally requires three study phases (as contrasted with the two-study phases generallyaccepted by FDA for an application submitted under the 351(k) (biosimilar) pathway). Moreover, the351(a) pathway generally does not allow for the possibility that a clinical trial in one indication can beextrapolated to multiple indications as is generally the case under the 351(k) (biosimilar) approvalpathway. Pursuing licensure under the 351(a) (novel biologic) approval pathway may presentdisadvantages in terms of the requirements for additional clinical and nonclinical trials, clinical trial costand failure risk, as well as the likelihood that multiple clinical trials would be required to obtain approval forall of the indications approved for the reference drug.

Risks Related to Commercialization of Our Product Candidates

We face intense competition and rapid technological change and the possibility that ourcompetitors may develop therapies that are similar, more advanced or more effective than ours.Other biosimilars or “biobetters” of the reference products we are targeting may be approved andsuccessfully commercialized before ours, which may adversely affect our financial condition andour ability to successfully commercialize our product candidates.

We expect to enter highly competitive pharmaceutical markets. Successful competitors in thepharmaceutical markets have demonstrated the ability to effectively discover, obtain patents, develop,test

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and obtain regulatory approvals for products, as well as an ability to effectively commercialize, market andpromote approved products. Numerous companies, universities and other research institutions areengaged in developing, patenting, manufacturing and marketing of products competitive with those thatwe are developing. Many of these potential competitors are large, experienced pharmaceutical companiesthat enjoy significant competitive advantages, such as substantially greater financial, research anddevelopment, manufacturing, personnel and marketing resources. These companies also have greaterbrand recognition and more experience in conducting preclinical testing and clinical trials of productcandidates and obtaining FDA and other regulatory approvals of products.

We have competitors both in the United States and internationally, including major multinationalpharmaceutical companies, specialty pharmaceutical companies and biotechnology companies. Some ofthe pharmaceutical and biotechnology companies we expect to compete with include, for example,Amgen Inc., or Amgen, Boehringer Ingelheim GmbH, or Boehringer, Hanwha Chemical Corporation,Pfizer Inc., or Pfizer, Samsung Bioepis Co., Ltd. (a Merck/Biogen/ Samsung biosimilar venture), SandozInternational GmbH, or Sandoz and Teva Pharmaceutical Industries, Ltd., as well as other smallercompanies such as Adello Biologics, LLC, Celltrion, Inc., Coherus Biosciences, Inc. and Mylan N.V. Weare currently aware that such competitors are engaged in the development of biosimilar productcandidates to adalimumab (Humira) —  for which Amgen has received approval, bevacizumab (Avastin)and trastuzumab (Herceptin), and expect that some of these competitors will commercialize theirbiosimilar products prior to us, which could materially harm our ability to gain market share.

Many of our competitors have substantially greater financial, technical and other resources, such as largerresearch and development staff and experienced marketing and manufacturing organizations. Additionalmergers and acquisitions in the pharmaceutical industry may result in even more resources beingconcentrated in our competitors. As a result, these companies may obtain regulatory approval morerapidly than we are able to and may be more effective in selling and marketing their products. Smaller orearly-stage companies may also prove to be significant competitors, particularly through collaborativearrangements with large, established companies. Our competitors may succeed in developing, acquiringor licensing on an exclusive basis, products that are more effective or less costly than any productcandidate that we may develop; they may also obtain patent protection that could block our products; andthey may obtain regulatory approval, product commercialization and market penetration earlier than wedo. Biosimilar product candidates developed by our competitors may render our potential productcandidates uneconomical, less desirable or obsolete, and we may not be successful in marketing ourproduct candidates against competitors. Competitors may also assert in their marketing or medicaleducation programs that their biosimilar products demonstrate a higher degree of biosimilarity to thereference products than do ours or other competitor’s biosimilar products, thereby seeking to influencehealthcare practitioners to select their biosimilar products rather than ours or other competitors.Competitors may also develop “biobetter” versions of reference products we are targeting. A biobetter is aproduct that contains alterations to the reference product’s chemical structure or delivery system thatprovide a clinical benefit over the original reference product. Biobetters developed by our competitorsmay compete advantageously against our products and limit our market success.

We expect additional companies to seek approval to manufacture and market biosimilar versions ofHumira, Avastin and Herceptin, in some cases, in advance of our commercialization timeline. If otherbiosimilars of Humira, Avastin or Herceptin are approved and successfully commercialized before ONS-3010, ONS-1045 or ONS-1050, respectively, we may never achieve significant market share for theseproducts, our revenue would be reduced and, as a result, our business, prospects and financial conditioncould be harmed.

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• settling patent lawsuits with biosimilar companies, resulting in such patents remaining anobstacle for biosimilar approval by others; submitting Citizen Petitions to request the FDACommissioner to take administrative action with respect to prospective and submitted biosimilarapplications;

• appealing denials of Citizen Petitions in United States federal district courts and seekinginjunctive relief to reverse approval of biosimilar applications;

• restricting access to reference brand products for equivalence and biosimilarity testing thatinterferes with timely biosimilar development plans;

• attempting to influence potential market share by conducting medical education with physicians,payors, regulators and patients claiming that biosimilar products are too complex for biosimilarapproval or are too dissimilar from reference products to be trusted as safe and effectivealternatives;

• implementing payor market access tactics that benefit their brands at the expense of biosimilars;

• seeking state law restrictions on the substitution of biosimilar products at the pharmacy withoutthe intervention of a physician or through other restrictive means such as excessiverecordkeeping requirements or patient and physician notification;

• seeking federal or state regulatory restrictions on the use of the same nonproprietary name asthe reference brand product for a biosimilar or interchangeable biologic;

• seeking changes to the United States Pharmacopeia, an industry-recognized compilation of drugand biologic standards;

• obtaining new patents covering existing products or processes that could extend patentexclusivity for a number of years or otherwise delay the launch of biosimilars; and

• influencing legislatures so that they attach special patent extension amendments to unrelatedfederal legislation.

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If efforts by developers and manufacturers of reference products to delay or limit the use ofbiosimilars are successful, our sales of biosimilar products may suffer.

Many developers and manufacturers of reference products have increasingly used legislative, regulatoryand other means to delay regulatory approval and to seek to restrict competition from manufacturers ofbiosimilars. These efforts may include or have included:

If an improved version of a reference product, such as Humira, Avastin or Herceptin, is developedor if the market for the reference product significantly declines, sales or potential sales of ourbiosimilar product candidates may suffer.

Originator companies may develop improved, or “biobetter,” versions of a reference product or change theproduct formulation as part of a life cycle extension strategy and may obtain regulatory approval of theimproved version under a new or supplemental BLA filed with the applicable regulatory authority. If theoriginator company succeeds in obtaining an approval of an improved biologic product, it may capture asignificant share of the collective reference product market in the applicable jurisdiction and significantlyreduce the market for the reference product and thereby the potential size of the market for our biosimilarproduct candidates. For example, AbbVie has obtained approval in the United States and Europe of animproved formulation of Humira that reduces injection pain, injection volume and potentially the number ofinjections a patient receives. Switching existing patients to biobetter versions reduces the availablemarket size for a biosimilar. In addition, the improved product may be protected by additional patent rightsthat may subject our follow-on biosimilar product to claims of infringement.

Biologic reference products may also face competition as technological advances are made that may offerpatients a more convenient form of administration or increased efficacy or as new products are introduced.As new products are approved that compete with the reference products to our biosimilar productcandidates, sales of the reference products may be adversely impacted or rendered obsolete. If themarket

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• the safety and efficacy of the product as demonstrated to be “highly similar” in clinical trials, andpotential advantages over competing treatments and the reference product;

• labeling or naming imposed by FDA or other regulatory agencies that suggest clinicaldifferences between the product and the reference product;

• the publication of unfavorable safety or efficacy data concerning our product by third-parties;

• the prevalence and severity of any side effects, including any limitations or warnings containedin a product’s approved labeling;

• the clinical indications for which approval is granted;

• whether we achieve an interchangeability designation in the United States, and if suchdesignation has a material effect on the perception of equivalence;

• the possibility that a competitor may achieve interchangeability and we may not;

• relative convenience and ease of administration as compared to the reference product;

• the extent to which our product may be more or less similar to the reference product thancompeting biosimilar product candidates;

• recognition and acceptance of our product candidates over our competitors’ products;

• prevalence of the disease or condition for which the product is approved;

• the cost of treatment, particularly in relation to competing treatments;

• the willingness of the target patient population to try biosimilar therapies and of physicians toprescribe these therapies;

• the strength of marketing and distribution support and timing of market introduction ofcompetitive products;

• the extent to which the product is approved for inclusion on formularies of hospitals andmanaged care organizations;

• publicity concerning our products or competing products and treatments;

• the extent to which third-party payors provide coverage and adequate reimbursement for ourproduct candidates, if approved; and

• our ability to maintain compliance with regulatory requirements.

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for the reference product is impacted, we may lose significant market share or experience limited marketpotential for our approved biosimilar products or product candidates, and the value of our product pipelinecould be negatively impacted. As a result of the above factors, our business, prospects and financialcondition could be harmed.

The commercial success of any current or future product candidate will depend upon the degreeof market acceptance by physicians, patients, third-party payors and others in the medicalcommunity.

Even with the requisite approvals from the FDA and comparable foreign regulatory authorities, thecommercial success of our product candidates will depend in part on the medical community, patients andthird-party payors accepting our product candidates as medically useful, cost-effective and safe. Anyproduct that we bring to the market may not gain market acceptance by physicians, patients, third-partypayors and others in the medical community. The degree of market acceptance of any of our productcandidates, if approved for commercial sale, will depend on a number of factors, including but not limitedto:

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Moreover, the market success of a biosimilar product, including widespread patient and doctoracceptance, may ultimately depend on whether it receives an interchangeability designation. This isparticularly true if one or more competing biosimilars receives such a designation. Future laws and drugformulary rules requiring or facilitating automatic substitution of biosimilars for reference products at thepharmacy level may also be limited to biosimilars that have received an interchangeable designation.

The labeling requirements for a biosimilar product have not been fully developed and there is uncertaintyas to how much of the reference product label a biosimilar applicant may or must copy, and the extent towhich the applicant must distinguish its product from the reference product. The naming of biosimilars isalso subject to significant uncertainty, and it is unclear whether biosimilar products will be required to bearnames that distinguish them from their reference products. Differences between the labels and names ofthe biosimilar and reference product may make it more difficult for us to achieve market uptake for ourproduct.

Even if our product candidate displays an equivalent or more favorable efficacy and safety profile inpreclinical and clinical trials, market acceptance of the product candidate will not be fully known until afterit is launched and may be negatively affected by a potential poor safety experience and the track record ofother biosimilar product candidates. If market acceptance of our product is less than that of the referenceproduct or competing biosimilars, the price of the product may need to be reduced or we may need toimplement additional marketing endeavors in order to accrue market share, which will negatively affectprofitability. Our efforts to educate the medical community and third-party payors on the benefits of ourproduct candidates may require significant resources, may be under-resourced compared to large well-funded pharmaceutical entities and may never be successful. If our product candidates are approved butfail to achieve an adequate level of acceptance by physicians, patients, third-party payors and others inthe medical community, we will not be able to generate sufficient revenue to become or remain profitable.

We currently have no marketing and sales organization. If we are unable to establish sales andmarketing capabilities in jurisdictions for which we choose to retain commercialization rights, wemay be unable to generate any revenue.

We currently have no marketing or sales organization. Our products have not yet been approved for sale,and we, as a company, have no experience selling and marketing our product candidates. Tosuccessfully commercialize any products that may result from our development programs, we will need todevelop these capabilities, either on our own or with others. If our product candidates receive regulatoryapproval, we intend to establish a sales and marketing organization with technical expertise andsupporting distribution capabilities to commercialize our product candidates in major markets where wemay choose to retain commercialization rights. Doing so will be expensive, difficult and time-consuming.Any failure or delay in the development of our internal sales, marketing and distribution capabilities wouldadversely impact the commercialization of our products. Further, given our lack of prior experience inmarketing and selling biosimilar products, our initial estimate of the size of the required sales force may bematerially more or less than the size of the sales force actually required to effectively commercialize ourproduct candidates. As such, we may be required to hire substantially more sales representatives andmedical support liaisons to adequately support the commercialization of our product candidates or wemay incur excess costs as a result of hiring more sales representatives than necessary. With respect tocertain geographical markets, we may enter into collaborations with other entities to utilize their localmarketing and distribution capabilities, but we may be unable to enter into such agreements on favorableterms, if at all. If our future collaboration partners do not commit sufficient resources to commercialize ourfuture products, if any, and we are unable to develop the necessary marketing capabilities on our own, wewill be unable to generate sufficient product revenue to sustain our business. If we are unable to establishsales and marketing capabilities for any approved product, whether on our own or through collaborations,our results of operations will be negatively impacted.

We may need to enter into alliances with other companies that can provide capabilities and fundsfor the development and commercialization of our product candidates. If we are unsuccessful informing or maintaining these alliances on favorable terms, our business could be harmed.

Because we are a clinical stage biopharmaceutical company, we have found it necessary to enter intoalliances with other companies. For example, we entered into service agreements with the Center forHuman

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Drug Research and InVentiv Health Clinical, LLC, or InVentiv, to assist us in conducting our Phase 1clinical trials and with InVentiv in preparation for conducting Phase 3 clinical trials for ONS-3010 andONS-1045. Aside from our joint participation agreement with Huahai for ONS-3010, we do not have anyagreements for the development and commercialization of our biosimilar product candidates for any majorex-U.S. markets, such as the EU and Japan. To date, we only have such agreements for smaller ex-U.S.markets. In particular, we entered into a co-development and license agreement with Huahai to co-develop ONS-3010 and ONS-1045 for Huahai to commercialize in the greater China region; a licenseagreement with Liomont to develop and commercialize ONS-3010 and ONS-1045 in Mexico; a licenseand collaboration agreements with IPCA to develop and commercialize ONS-3010, ONS-1045 and ONS-1050 in India, Sri-Lanka, Myanmar, Nepal and Bhutan; and a joint development and license agreementwith GMS Tenshi to develop and commercialize ONS-3010 and ONS-1045 in emerging markets,excluding China, India and Mexico. In the future, we may also find it necessary to form other alliances orjoint ventures with major pharmaceutical companies to jointly develop and/or commercialize specificbiosimilar product candidates. In such alliances, we would expect our collaboration partners to providesubstantial capabilities in regulatory affairs, as well as sales and marketing. We may not be successful inentering into any such alliances. Even if we do succeed in securing such alliances, we may not be able tomaintain them if, for example, development or approval of a product candidate is delayed or sales of anapproved product are disappointing. If we are unable to secure or maintain such alliances we may nothave the capabilities necessary to continue or complete development of our product candidates and bringthem to market, which may have an adverse effect on our business.

In addition to commercialization capabilities, we may depend on our alliances with other companies toprovide substantial additional funding for development and potential commercialization of our productcandidates. We may not be able to obtain funding on favorable terms from these alliances, and if we arenot successful in doing so, we may not have sufficient funds to develop a particular product candidateinternally or to bring product candidates to market. Failure to bring our product candidates to market willprevent us from generating sales revenue, and this will substantially harm our business. Furthermore, anydelay in entering into these alliances could delay the development and commercialization of our productcandidates and reduce their competitiveness even if they reach the market. As a result, our business andoperating results may be harmed.

Policies and practices governing the naming of biosimilar product candidates are neither fullyestablished nor fully harmonized and are subject to debate and change. Failure to achieve anonproprietary name sufficiently close to the reference product or be competitivelydisadvantaged in this regard, could adversely affect the commercial performance of our biosimilarproduct candidate.

United States Adopted Name, or USAN, and International Nonproprietary Names, or INN, two importantbodies involved in nonproprietary nomenclature, have no policy for the naming of biosimilar productcandidates, and products are named on a case by case basis. Non-glycosylated proteins can follow theapproach established for small molecule generics, which is to retain the same nonproprietary name if it issynthesized by a different route provided the substance is the same. Glycosylated proteins from differentsources are given distinct names, as these proteins are expected to differ in their glycosylation profile. Thesame approach is valid for all other modifications to the protein that can occur in a cell after the cell hasfinished making the protein. A system currently under discussion at the World Health Organization thatwould enable the clear definition of all similar biotherapeutic proteins would include the INN of thereference product in the first part of the name, and some form of biological qualifier that could uniquelyidentify the substance. Currently the FDA and EMA have final authority regarding names in the UnitedStates and the EU, respectively, and it is unclear how they will handle nonproprietary nomenclature in thefuture. However, recent draft FDA guidance has recommended an approach to distinguish productmanufacturers of the reference biologic, biosimilars, interchangeables, and related biologics byestablishing nonproprietary names that are distinct from the reference product. For the reference biologic,FDA intends to use as a “core name” the name adopted by the USAN Council for the drug substance. Fora biosimilar, interchangeable, or related biologic, the core name is the name of the drug substancecontained in the relevant previously licensed product.

Under FDA’s proposed approach, the nonproprietary name designated for reference biologics, relatedbiologics, and biosimilars will include a unique suffix in addition to the core name. FDA is seekingcomment on whether the nonproprietary name for an interchangeable product should include a unique

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suffix, or should share the same suffix as its reference product. This policy could suggest to payors,providers and patients that our biosimilar product is different from the reference product, which maynegatively affect the price we can charge, our sales and market share, which could harm our business.Notably, by affixing a random four letter suffix to the USAN, there is a potential for misuse that couldcause misreporting of adverse events or otherwise to the wrong biosimilar product. If our biosimilars werewrongly reported as having caused adverse events or other negative outcomes, it could affect our brandand negatively harm our business.

The third-party coverage and reimbursement status of newly approved products is uncertain.Failure to obtain or maintain adequate coverage and reimbursement for new or current productscould limit our ability to market those products and decrease our ability to generate revenue.

Pricing, coverage and reimbursement of our biosimilar product candidates, if approved, may not beadequate to support our commercial infrastructure. Our per-patient prices may not be sufficient to recoverour development and manufacturing costs and potentially achieve profitability. The availability andadequacy of coverage and reimbursement by governmental and private payors are essential for mostpatients to be able to afford expensive treatments such as ours, if approved. Accordingly, sales of ourproduct candidates will depend substantially, both domestically and abroad, on the extent to which thecosts of our product candidates will be paid for by health maintenance, managed care, pharmacy benefitand similar healthcare management organizations or reimbursed by government authorities, privatehealth insurers and other third-party payors. If coverage and reimbursement are not available, or areavailable only at insufficient levels, we may not be able to successfully commercialize our productcandidates. Coverage decisions may depend upon clinical and economic standards that disfavor newdrug products when more established or lower cost therapeutic alternatives are already available orsubsequently become available. Even if coverage is provided, the approved reimbursement amount maynot be adequate to allow us to establish or maintain pricing sufficient to realize a return on our investment.

There is significant uncertainty related to third-party coverage and reimbursement of newly approvedproducts. In the United States, third-party payors, including private and governmental payors such as theMedicare and Medicaid programs, play an important role in determining the extent to which new drugsand biologics will be covered and reimbursed. The Medicare program covers certain individuals aged 65or older or those who are disabled or suffering from end-stage renal disease. The Medicaid program,which varies from state to state, covers certain individuals and families who have limited financial meansand/or certain disabilities. The Medicare and Medicaid programs increasingly are used as models for howprivate payors and other governmental payors develop their coverage and reimbursement policies fordrugs and biologics. It is difficult to predict at this time what third-party payors will decide with respect tothe coverage and reimbursement for our biosimilar product candidates, if approved. In addition, in theUnited States, no uniform policy of coverage and reimbursement for biologics exists among third-partypayors. Therefore, coverage and reimbursement for biologics can differ significantly from payor to payor.As a result, the process for seeking favorable coverage determinations often is time-consuming and costlyand may require us to provide scientific and clinical support for the use of our products to each payorseparately, with no assurance that coverage and adequate reimbursement will be obtained. Our inabilityto promptly obtain coverage and profitable reimbursement rates from both government-funded and privatepayors for any approved products that we develop could have an adverse effect on our operating results,our ability to raise capital needed to commercialize products and our overall financial condition.

Outside the United States, pharmaceutical businesses are generally subject to extensive governmentalprice controls and other market regulations. We believe the increasing emphasis on cost-containmentinitiatives in the EU, Canada and other countries has and will continue to put pressure on the pricing andusage of our product candidates. In many countries, the prices of medical products are subject to varyingprice control mechanisms as part of national health systems. Other countries allow companies to fix theirown prices for medical products, but monitor and control company profits. Additional foreign price controlsor other changes in pricing regulation could restrict the amount that we are able to charge for our productcandidates. Accordingly, in markets outside the United States, the reimbursement for our products may bereduced compared with the United States and may be insufficient to generate commercially reasonablerevenue and profits.

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Moreover, increasing efforts by governmental and third-party payors in the United States and abroad tocontrol healthcare costs may cause such organizations to limit both coverage and the level ofreimbursement for new products approved and, as a result, they may not cover or provide adequatepayment for our product candidates. While cost containment practices generally benefit biosimilars,severe cost containment practices may adversely affect our product sales. We expect to experiencepricing pressures in connection with the sale of any of our product candidates due to the trend towardmanaged healthcare, the increasing influence of health maintenance organizations and additionallegislative changes.

Our biosimilar product candidates, if approved, will face price competition from both therespective reference products and other biosimilars. This price competition could exceed ourcapacity to respond, negatively impacting our market share and revenue as well as adverselyaffecting the overall financial health and attractiveness of the market for the biosimilar.

Successful competitors in the biosimilar market will likely have the ability to effectively compete on pricethrough payors and their third-party administrators who exert downward pricing pressure. It is possible ourcompetitors’ compliance with price discounting demands in exchange for market share could exceed ourcapacity to respond in kind and reduce market prices beyond our expectations. In addition, the RPS maycompete effectively on price and limit our ability to accrue market share. Such practices may limit our andour collaboration partners’ ability to increase market share and will also impact profitability.

Risks Related to Our Reliance on Third Parties

We rely on third parties to conduct our preclinical and clinical trials and perform other tasks forus. If these third parties do not successfully carry out their contractual duties, meet expecteddeadlines or comply with regulatory requirements, we may not be able to obtain regulatoryapproval for or commercialize our product candidates and our business could be harmed.

We have relied upon and plan to continue to rely upon CROs to monitor and manage data for our ongoingpreclinical and clinical programs. We rely on these parties for execution of our preclinical and clinical trialsand we can only control certain aspects of their activities. Nevertheless, we are responsible for ensuringthat each of our studies is conducted in accordance with the applicable protocol, legal, regulatory andscientific requirements and standards and our reliance on the CROs does not relieve us of our regulatoryresponsibilities. We and our CROs and other vendors are required to comply with cGMP, GCP, and GoodLaboratory Practices, or GLP, which are regulations and guidelines enforced by the FDA, the CompetentAuthorities of the Member States of the EEA and comparable foreign regulatory authorities for all of ourproduct candidates in clinical development. Regulatory authorities enforce these regulations throughperiodic inspections of study sponsors, principal investigators, study sites and other contractors. If we,any of our CROs, service providers or investigators fail to comply with applicable regulations or GCPs, thedata generated in our preclinical and clinical trials may be deemed unreliable and the FDA, EMA orcomparable foreign regulatory authorities may require us to perform additional preclinical and clinical trialsbefore approving our marketing applications. We cannot assure you that upon inspection by a givenregulatory authority, such regulatory authority will determine that any of our clinical trials comply with GCPrequirements. In addition, our clinical trials must be conducted with products produced under cGMPregulations. Failure to comply by any of the participating parties or ourselves with these regulations mayrequire us to repeat clinical trials, which would delay the regulatory approval process. Moreover, ourbusiness may be implicated if our CROs or any other participating parties violate federal or state fraudand abuse or false claims laws and regulations or healthcare privacy and security laws.

If any of our relationships with any of these third-party CROs terminate, we may not be able to enter intoarrangements with alternative CROs or do so on commercially reasonable terms. In addition, our CROsare not our employees, and except for remedies available to us under our agreements with such CROs,we cannot control whether or not they devote sufficient time and resources to our on-going preclinical andclinical programs. If CROs do not successfully carry out their contractual duties or obligations or meetexpected deadlines, if they need to be replaced or if the quality or accuracy of the data they obtain iscompromised due to the failure to adhere to our protocols, regulatory requirements or for other reasons,our clinical trials may be extended, delayed or terminated and we may not be able to obtain regulatoryapproval for or successfully commercialize our product candidates. CROs may also generate higher coststhan anticipated. As a result, our results of operations and the commercial prospects for our productcandidates would be harmed, our costs could increase and our ability to generate revenue could bedelayed.

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• failure to establish contracts with fill-finish contract manufacturing organization or CMOs, anddevice vendors;

• product loss due to contamination, equipment failure or improper installation or operation ofequipment or vendor or operator error;

• failure to maintain fermentation or other manufacturing conditions necessary to achievingbiosimilarity to the reference product;

• infringing intellectual property rights of third parties relating to manufacturing and quality testing;

• failure to achieve or maintain compliance with FDA’s requirements for acceptance of ourmanufacturing facilities; and

• labor shortages, natural disasters and power failures.

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Changing or adding additional CROs involves additional cost and requires management time and focus.In addition, there is a natural transition period when a new CRO commences work. As a result, delaysmay occur, which can negatively impact our ability to meet our desired clinical development timelines. Wemay encounter challenges or delays in the future and these delays or challenges may have an adverseeffect on our business, financial condition and prospects.

We manufacture bulk drug substance for preclinical and clinical supplies of our productcandidates in our in-house facility, and intend to do the same for other companies. We also intendto manufacture bulk drug substance for commercial sale in our facility. Our business could beharmed if our facility is damaged or we otherwise fail to manufacture our product candidates atthe necessary quantity or quality levels.

If we are unable to manufacture sufficient supplies of our product candidates, our development effortswould be delayed, which would adversely affect our business and prospects. In addition, our failure tocomply with applicable regulations could result in sanctions being imposed on us, including fines,injunctions, civil penalties, delays, suspension or withdrawal of approvals, license revocation, seizures orrecalls of products, operating restrictions and criminal prosecutions, any of which could significantly andadversely affect supplies of our product candidates or any other product candidates or products that wemay develop.

If any of our product candidates are approved, in order to produce the quantities necessary to meetanticipated market demand, we may need to increase our manufacturing capacity. If we are unable toproduce our product candidates and in sufficient quantities to meet the requirements for the launch ofthese products or to meet future demand, our revenue and gross margins could be adversely affected.

Our manufacturing depends on our suppliers. For single-use technology, we depend on specialty-manufactured bags and our reliability on the supply of such bags can impact manufacturing. In addition,the quality of such bags may vary, and in certain rare circumstances, the bag components may leak intothe product, which would make the product unsuitable. We also depend on the timely supply and qualityof all raw materials, which are crucial to the successful manufacturing of our products. Further, we dependon our fill-finish partners to ensure quality products and our partners’ failure to deliver a consistent supplyof high-quality products is a risk to the business.

We have never manufactured commercial scale quantities in our facilities and we may face challenges inensuring a consistent supply for global markets.

Any adverse developments affecting the manufacturing operations of our biosimilar productcandidates could substantially increase our costs and limit supply for our product candidates.

The process of manufacturing our product candidates is complex, highly regulated and subject to severalrisks, including but not limited to:

Even minor deviations from normal manufacturing processes for any of our product candidates couldresult in reduced production yields, product defects and other supply disruptions. In addition, if we requirea change in CMO, this will add time along with financial and personnel resources to changemanufacturing sites. If microbial, viral or other contaminations are discovered in our product candidates orin our manufacturing facilities, our facilities may need to be closed for an extended period of time toinvestigate and remedy the contamination.

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Any adverse developments affecting manufacturing operations for our product candidates may result inshipment delays, inventory shortages, lot failures, withdrawals or recalls or other interruptions in thesupply of our product candidates. We may also have to take inventory write-offs and incur other chargesand expenses for product candidates that fail to meet specifications, undertake costly remediation effortsor seek more costly manufacturing alternatives.

We expect to depend on third parties for the commercialization of our biosimilar productcandidates, and their failure to commercialize in those markets could harm our business andoperating results.

We will need to identify third-parties and then negotiate the terms of the development andcommercialization agreements for the United States and major ex-U.S. markets, such as the EU andJapan. We may not be successful in identifying contract counterparties, and we may not be able to reachagreements with such parties on terms that are as favorable to our company as we would anticipate. Wecurrently have in place only one licensing agreement for commercialization in the United States. Ourother current arrangements are for smaller ex-U.S. markets where we would not otherwise intend tocommercialize our biosimilar product candidates, such as China, Mexico and India, among others. If theseentities fail to exercise commercially reasonable efforts to market and sell our products in their respectivelicensed jurisdictions or are otherwise ineffective in doing so, our business will be harmed and we may notbe able to adequately remedy the harm through negotiation, litigation, arbitration or termination of thelicense agreements.

Moreover, any disputes with our collaboration partners concerning the adequacy of theircommercialization efforts will substantially divert the attention of our senior management from otherbusiness activities and will require us to incur substantial legal costs to fund litigation or arbitrationproceedings.

In the event that any of our license agreements terminate, we may need to find another partner in thosemarkets to commercialize and in certain instances, manufacture our biosimilar product candidates.Further, upon any such termination, our contract counterparties may still have the right to commercializethese biosimilar product candidates in such markets, which may affect our ability to commercialize in thesame markets.

We are required to co-fund the development of, and proportionately share in the revenue from, thecommercialization of ONS-3010 in the United States, Canada, EU, Japan, Australia and NewZealand under a joint participation agreement with Huahai. We may also be required to form ajoint venture to further co-develop and commercialize ONS-3010 with Huahai in the agreedcountries, if so requested by Huahai.

We currently have a joint participation arrangement with Huahai that provides for the co-funding of thedevelopment of ONS-3010 in the United States, Canada, EU, Japan, Australia and New Zealand and theproportionate sharing of the revenue from commercialization of ONS-3010 in such countries. We couldalso be required to further co-develop and commercialize ONS-3010 with Huahai in the agreed countriespursuant to a joint venture, if so requested by Huahai, as contemplated by our joint participationagreement. Under the joint participation agreement, assuming Huahai funds its proportionate share ofdevelopment costs incurred after completion of the “Phase-3 Ready Package” for ONS-3010, we will havea 49% value ownership interest with Huahai having a 51% value ownership interest in ONS-3010.Accordingly, our share of any potential revenues from the successful commercialization of ONS-3010 inthe agreed countries, including major markets such as the United States and EU, would also be inproportion to such ownership interests. While we anticipate that we will each act in accordance with theterms of our agreement for the joint development and commercialization of ONS-3010, we cannot controlHuahai, nor can we predict with any certainty that our interests will be aligned and that we willsuccessfully collaborate.

We entered into a lease for additional manufacturing and research and development space andour business may be interrupted if these facilities are not ready for occupation in time toimplement our expansion efforts, which could impact our ability to advance our early-stagepreclinical pipeline and any future product candidates.

We entered into a lease for a new facility in our current industrial complex, which commenced inMarch 2016. We may build-out this facility as an additional state-of-the-art development infrastructure,which we will occupy in phases, as needed. There can be no assurance that the new space will beprepared

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and ready in time for our move-in, or we may never need the facility. Further, the expansion could disruptour current development and manufacturing operations, resulting in an inability to meet our deadlines andleading to a slow realization of the efficiencies and capacity anticipated from such expansion. Adverseconsequences resulting from a delay in the expansion could harm our relationships with our license andcollaboration partners, and further affect our ability to develop and commercialize our biosimilar productcandidates. In addition, such expansions of our manufacturing and research and development capabilitiesmay increase our costs. Any of the above could delay regulatory approval and commercialization of ourcurrent early-stage preclinical and future biosimilar product candidates. All of the foregoing could result insubstantial costs to us and could result in material interruption to our business and operations.

We currently engage single source suppliers for clinical trial services and multiple sourcesuppliers for fill-finish manufacturing and product testing of our biosimilar product candidates.The loss of any of these suppliers, or any future single source suppliers, could harm ourbusiness.

Our current clinical stage biosimilar product candidates were fill-finished by Ajinomoto Althea, Inc., orAlthea. As such, we are heavily dependent on Althea for supplying us with finished product candidates.Although we believe that there are alternate sources for this service, we cannot assure you that identifyingand establishing new relationships would not result in significant delay in the development of ourbiosimilar product candidates. Additionally, we may not be able to enter into arrangements withalternative vendors on commercially reasonable terms, or at all. A delay in the development of ourbiosimilar product candidates or having to enter into a new agreement with a different third party on lessfavorable terms than we have with our current suppliers could negatively impact our business.

We are subject to significant regulation with respect to manufacturing our product candidates.Our manufacturing facilities may not continue to meet regulatory requirements or may not be ableto meet supply demands.

Components of a finished therapeutic product approved for commercial sale or used in late-stage clinicaltrials must be manufactured in accordance with cGMP and other applicable regulations. Theseregulations govern manufacturing processes and procedures (including record keeping) and theimplementation and operation of quality systems to control and assure the quality of investigationalproducts and products approved for sale. Poor control of production processes can lead to theintroduction of contaminants or to inadvertent changes in the properties or stability of our productcandidates that may not be detectable in final product testing. We must supply all necessarydocumentation in support of a BLA or MAA on a timely basis and must adhere to GLP and cGMPregulations enforced by the FDA and other regulatory agencies through their facilities inspection program.We have never produced a commercially approved pharmaceutical product at our facilities and thereforehave not obtained the requisite regulatory authority approvals to do so. Our facilities and quality systemsmust pass a pre-approval inspection for compliance with the applicable regulations as a condition ofregulatory approval of our product candidates or any of our other potential products. In addition, theregulatory authorities may, at any time, audit or inspect our manufacturing facility or our associatedquality systems for compliance with the regulations applicable to the activities being conducted. If ourfacilities do not pass a pre-approval facility inspection, regulatory approval of the products may not begranted or may be substantially delayed until any violations are corrected to the satisfaction of theregulatory authority, if ever.

The regulatory authorities also may, at any time following approval of a product for sale, audit ourmanufacturing facilities. If any such inspection or audit identifies a failure to comply with applicableregulations or if a violation of our product specifications or applicable regulations occurs independent ofsuch an inspection or audit, the relevant regulatory authority may require remedial measures that may becostly and time-consuming for us to implement and that may include the temporary or permanentsuspension of a clinical trial or commercial sales or the temporary or permanent closure of our facility. Anysuch remedial measures could harm our business.

If we fail to maintain regulatory compliance, the FDA or other applicable regulatory authority can imposeregulatory sanctions including, among other things, refusal to approve a pending application for a newbiologic product, withdrawal of an approval or suspension of production. As a result, our business,financial condition and results of operations may be harmed.

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These factors could cause us to incur higher costs and could cause the delay or termination of clinicaltrials, regulatory submissions, required approvals or commercialization of our product candidates.

Risks Related to Intellectual Property

If we infringe or are alleged to infringe intellectual property rights of third parties, our businesscould be harmed. Third-party claims of intellectual property infringement may prevent or delayour development and commercialization efforts.

Our commercial success depends in large part on avoiding infringement of the patents and proprietaryrights of third parties. There have been many lawsuits and other proceedings involving patent and otherintellectual property rights in the pharmaceutical industry, including patent infringement lawsuits,interferences, oppositions and reexamination proceedings before the U.S. Patent and Trademark Office,or USPTO, and corresponding foreign patent offices. Numerous U.S. and foreign issued patents andpending patent applications, which are owned by third parties, exist in the fields in which we aredeveloping product candidates. As the pharmaceutical industry expands and more patents are issued, therisk increases that our product candidates may be subject to claims of infringement of the patent rights ofthird parties.

Our research, development and commercialization activities may infringe or otherwise violate or beclaimed to infringe or otherwise violate patents owned or controlled by other parties. The companies thatoriginated the products for which we intend to introduce biosimilar versions, such as AbbVie, Inc., orAbbVie, and Genentech, Inc., or Genentech, as well as other competitors (including other companiesdeveloping biosimilars) have developed worldwide patent portfolios of varying sizes and breadth, many ofwhich are in fields relating to our business, and it may not always be clear to industry participants,including us, which patents cover various types of products, formulations, manufacturing processes ormethods of use.

Third parties may assert that we are employing their proprietary technology without authorization. Theremay be third-party patents or patent applications with claims to compositions, formulations, methods ofmanufacture or methods for treatment related to the use or manufacture of our product candidates. Wehave conducted patent searches for third-party patents with respect to each of our lead productcandidates, and are aware of third-party patent families with claims that, if valid and enforceable, could beconstrued to cover such product candidates or their respective methods of manufacture or use. Some ofthese patents have expiration dates that could extend reference product exclusivity past our anticipatedproduct launch dates. We cannot guarantee that any of our analyses are complete and thorough, nor canwe be sure that we have identified each and every patent and pending application in the United Statesand abroad that is relevant or necessary to the commercialization of our product candidates. Moreover,because patent applications can take many years to issue, there may be currently pending patentapplications that may later result in issued patents covering our product candidates. We have not yetcompleted freedom to operate analysis on our early-stage pipeline or products we are evaluating forinclusion in our future biosimilar product pipeline and therefore, we do not know whether or to what extentthese products may be subject to unexpired patents. The existence of any patent with valid andenforceable claims covering one or more of our product candidates could cause substantial delays in ourability to introduce a biosimilar candidate into the U.S. market if the term of such patent extends beyondour desired product launch date.

There may also be patent applications that have been filed but not published and if such applicationsissue as patents, they could be asserted against us. For example, in most cases, a patent filed todaywould not become known to industry participants for at least 18 months given patent rules applicable inmost jurisdictions that do not require publication of patent applications until 18 months after filing.Moreover, we may face claims from non-practicing third-party entities that have no relevant productrevenue and against whom our own patent portfolio may have no deterrent effect. In addition, the scope ofpatent claims is subject to interpretation by the courts, and the interpretation is not always uniform. If weare sued for patent infringement, we would need to demonstrate that our product candidates, products ormethods either do not infringe the asserted patent claims or that the claims are invalid and/orunenforceable, and we may not be successful.

Proving that a patent is invalid or unenforceable is difficult. For example, in the United States, provinginvalidity requires a showing of clear and convincing evidence to overcome the presumption of validityenjoyed by issued patents. In proceedings before courts in the EU, the burden of proving invalidity of a

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patent also usually rests on the party alleging invalidity. Even if we are successful in litigation, we mayincur substantial costs and the time and attention of our management and scientific personnel could bediverted, which could harm our business. In addition, we may not have sufficient resources to bring theseactions to a successful conclusion.

Third parties could bring claims against us that would cause us to incur substantial expenses and, ifsuccessful against us, could cause us to pay substantial monetary damages. The outcome of intellectualproperty litigation is subject to uncertainties that cannot be adequately quantified in advance. If a patentinfringement suit were brought against us, we could be forced to stop or delay research, development,manufacturing or sales of the product or product candidate that is the subject of the suit. Ultimately, wecould be prevented from commercializing a product or be forced to cease some aspect of our businessoperations if, as a result of actual or threatened patent infringement claims, we are unable to enter intolicenses on commercially acceptable terms or at all. If, as a result of patent infringement claims or to avoidpotential claims, we choose or are required to seek licenses from third parties, these licenses may not beavailable on acceptable terms or at all. Even if we are able to obtain a license, the license may obligate usto pay substantial license fees or royalties or both, and the rights granted to us might be nonexclusive,which could result in our competitors gaining access to the same intellectual property.

Parties making claims against us may obtain injunctive or other equitable relief, which could effectivelyblock our ability to further develop and commercialize one or more of our product candidates. Defense ofthese claims, regardless of their merit, would likely involve substantial litigation expense and would likelybe a substantial diversion of employee resources from our business. In the event of a successful claim ofinfringement against us, we may, in addition to being blocked from the market, have to pay substantialmonetary damages, including treble damages and attorneys’ fees for willful infringement, pay royalties,redesign our infringing products or obtain one or more licenses from third parties, which may beimpossible or require substantial time and monetary expenditure.

In addition to infringement claims against us, we may become a party to other patent litigation and otherproceedings, including interference, derivation or post-grant proceedings declared or granted by theUSPTO and similar proceedings in foreign countries, regarding intellectual property rights with respect toour current or future products. An unfavorable outcome in any such proceedings could require us to ceaseusing the related technology or to attempt to license rights to it from the prevailing party or could cause usto lose valuable intellectual property rights. Our business could be harmed if the prevailing party does notoffer us a license on commercially reasonable terms, if any license is offered at all. Litigation or otherproceedings may fail and, even if successful, may result in substantial costs and distract our managementand other employees. We may also become involved in disputes with others regarding the ownership ofintellectual property rights.

Third parties may submit applications for patent term extensions in the United States or other jurisdictionswhere similar extensions are available and/or Supplementary Protection Certificates in the EU states(including Switzerland) seeking to extend certain patent protection that, if approved, may interfere with ordelay the launch of one or more of our biosimilar product candidates.

The cost to us of any patent litigation or other proceeding, even if resolved in our favor, could besubstantial. Patent litigation and other proceedings may fail, and even if successful, may result insubstantial costs and distract our management and other employees. The companies that originated theproducts for which we intend to introduce biosimilar versions, as well as other competitors (including otherbiosimilar companies) may be able to sustain the costs of such litigation or proceedings more effectivelythan we can because of their substantially greater financial resources. Uncertainties resulting from theinitiation and continuation of patent litigation or other proceedings could impair our ability to compete inthe marketplace.

So called “submarine” patents may be granted to our competitors that may significantly alter ourlaunch timing expectations, reduce our projected market size, cause us to modify our product orprocess or block us from the market altogether.

The term “submarine” patent has been used in the pharmaceutical industry and in other industries todenote a patent issuing from a U.S. application with an effective filing date prior to June 8, 1995 that wasnot published, publically known or available prior to its grant. Submarine patents add substantial risk and

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uncertainty to our business. Submarine patents may be issued to our competitors covering our biosimilarproduct candidates or our pipeline candidates and thereby cause significant market entry delay, defeat ourability to market our product candidates or cause us to abandon development and/or commercialization ofa product candidate.

The issuance of one or more submarine patents may harm our business by causing substantial delays inour ability to introduce a biosimilar candidate into the U.S. market.

We may not identify relevant patents or may incorrectly interpret the relevance, scope orexpiration of a patent, which might adversely affect our ability to develop and market ourproducts.

We cannot guarantee that any of our patent searches or analyses, including but not limited to theidentification of relevant patents, the scope of patent claims or the expiration of relevant patents, arecomplete and thorough, nor can we be certain that we have identified each and every patent and pendingapplication in the United States and abroad that is relevant to or necessary for the commercialization ofour product candidates in any jurisdiction.

The scope of a patent claim is determined by an interpretation of the law, the written disclosure in apatent and the patent’s prosecution history. Our interpretation of the relevance or the scope of a patent ora pending application may be incorrect, which may negatively impact our ability to market our products orpipeline candidates. We may incorrectly determine that our products are not covered by a third partypatent. Further, we may conclude that a well-informed court or other tribunal would find the claims of arelevant third-party patent to be invalid based on prior art, enablement, written description, or otherground, and that conclusion may be incorrect, which may negatively impact our ability to market ourproducts or pipeline molecules.

Many patents may cover a marketed product, including but not limited to the composition of the product,methods of use, formulations, cell line constructs, vectors, growth media, production processes andpurification processes. The identification of all patents and their expiration dates relevant to the productionand sale of a reference product is extraordinarily complex and requires sophisticated legal knowledge inthe relevant jurisdiction. It may be impossible to identify all patents in all jurisdictions relevant to amarketed product. We may not identify all relevant patents, or incorrectly determine their expiration dates,which may negatively impact our ability to develop and market our products.

Our failure to identify and correctly interpret relevant patents may negatively impact our ability to develop,market and commercialize our products.

We may become involved in lawsuits to protect or enforce any future patents, which could beexpensive, time-consuming and unsuccessful.

Although we have no issued patents, when and if we do obtain issued patents, we may discover thatcompetitors are infringing those patents. Expensive and time-consuming litigation may be required toenforce our patents. If we or one of our collaboration partners were to initiate legal proceedings against athird party to enforce a patent covering one of our product candidates, the defendant could counterclaimthat the patent covering our product candidate is invalid and/or unenforceable. In patent litigation in theUnited States, defendant counterclaims alleging invalidity and/or unenforceability are commonplace.Grounds for a validity challenge could be an alleged failure to meet any of several statutory requirements,including but not limited to lack of novelty, obviousness or non-enablement. Grounds for anunenforceability assertion could include an allegation that someone involved in the prosecution of thepatent withheld relevant or material information related to the patentability of the invention from theUSPTO or made a misleading statement during prosecution. The outcome following legal assertions ofinvalidity and unenforceability is unpredictable, and there is a risk that a court will decide that a patent ofours is invalid or unenforceable, in whole or in part, and that we do not have the right to stop the otherparty from using the invention at issue. There is also a risk that, even if the validity of such patents isupheld, the court will construe the patent’s claims narrowly and decide that we do not have the right tostop the other party from using the invention at issue on the grounds that our patent claims do not coverthe invention. An adverse outcome in a litigation or proceeding involving our patents could limit our abilityto assert our patents against those parties or other competitors, and may curtail or preclude our ability to

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exclude third parties from making and selling similar or competitive products. Any of these occurrencescould adversely affect our competitive business position, business prospects and financial condition. Evenif we establish infringement, the court may decide not to grant an injunction against further infringingactivity and instead award only monetary damages, which may or may not be an adequate remedy.

Similarly, if we assert trademark infringement claims, a court may determine that the marks we haveasserted are invalid or unenforceable, or that the party against whom we have asserted trademarkinfringement has superior rights to the marks in question. In this case, we could ultimately be forced tocease use of such trademarks.

Furthermore, because of the substantial amount of discovery required in connection with intellectualproperty litigation, there is a risk that some of our confidential information could be compromised bydisclosure during any litigation we initiate to enforce our patents. There could also be publicannouncements of the results of hearings, motions or other interim proceedings or developments. Ifsecurities analysts or investors perceive these results to be negative, it could have a negative impact onthe market price of our securities. Moreover, there can be no assurance that we will have sufficientfinancial or other resources to file and pursue such infringement claims, which typically last for yearsbefore they are concluded. Even if we ultimately prevail in such claims, the monetary cost of such litigationand the diversion of the attention of our management and scientific personnel could outweigh any benefitwe receive as a result of the proceedings.

We may be subject to claims that our employees, consultants or independent contractors havewrongfully used or disclosed confidential information of third parties or that our employees havewrongfully used or disclosed alleged trade secrets of their former employers.

We employ individuals and retain independent contractors and consultants and members on our board ofdirectors who were previously employed at universities or other pharmaceutical companies, including ourcompetitors or potential competitors. For example, our Chairman, President and Chief Executive Officer,Pankaj Mohan, Ph.D., our Chief Medical Officer, Kenneth M. Bahrt, M.D., our Senior Vice President ofBusiness Strategy & Development, Stephen J. McAndrew, Ph.D., and our Vice President of RegulatoryAffairs, Elizabeth A. Yamashita, are former employees of Bristol-Myers Squibb Company. Further,Dr. Mohan and Dr. Bahrt are former employees of Genentech, which is the reference product sponsor ofbevacizumab (Avastin), for which we seek to develop ONS-1045 as a biosimilar, and trastuzumab(Herceptin), for which we seek to develop ONS-1050 as a biosimilar. Additionally, Dr. McAndrew was aformer employee of Roche. Although we try to ensure that our employees, consultants and independentcontractors do not use the proprietary information or know-how of others in their work for us and we arenot currently subject to any claims that they have done so, we may in the future be subject to such claims.Litigation may be necessary to defend against these claims. If we fail in defending any such claims, inaddition to paying monetary damages, we may lose valuable intellectual property rights or personnel,which could adversely impact our business. Even if we are successful in defending against such claims,litigation could result in substantial costs and be a distraction to management and other employees.

In addition, while we typically require our employees, consultants and contractors who may be involved inthe development of intellectual property to execute agreements assigning such intellectual property to us,we may be unsuccessful in executing such an agreement with each party who in fact develops intellectualproperty that we regard as our own, which may result in claims by or against us asserting ownership ofsuch intellectual property. If we fail in prosecuting or defending any such claims, in addition to payingmonetary damages, we may lose valuable intellectual property rights. Even if we are successful inprosecuting or defending against such claims, litigation could result in substantial costs and be adistraction to our senior management and scientific personnel.

We currently have no issued patents. If we are unable to obtain and maintain effective patentrights for our product candidates or any future product candidates, we may not be able to preventcompetitors from using technologies we consider important in our successful development andcommercialization of our product candidates, resulting in loss of any potential competitiveadvantage our patents may have otherwise afforded us.

While our principal focus in matters relating to intellectual property is to avoid infringing the valid andenforceable rights of third parties, we also rely upon a combination of patents, trade secret protection and

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confidentiality agreements to protect our own intellectual property related to our product candidates anddevelopment programs. Our ability to enjoy any competitive advantages afforded by our own intellectualproperty depends in large part on our ability to obtain and maintain patents and other intellectual propertyprotection in the United States and in other countries with respect to various proprietary elements of ourproduct candidates, such as, for example, our product formulations and processes for manufacturing ourproducts and our ability to maintain and control the confidentiality of our trade secrets and confidentialinformation critical to our business.

We have sought to protect our proprietary position by filing patent applications in the United States andabroad related to our products that are important to our business. This process is expensive and time-consuming, and we may not be able to file and prosecute all necessary or desirable patent applications ata reasonable cost or in a timely manner. It is also possible that we will fail to identify patentable aspects ofour research and development output before it is too late to obtain patent protection. There is noguarantee that any patent application we file will result in an issued patent having claims that protect ourproducts; and, as a result, we may not be able to effectively prevent others from commercializingcompetitive products. Additionally, while the basic requirements for patentability are similar acrossjurisdictions, each jurisdiction has its own specific requirements for patentability. We cannot guaranteethat we will obtain identical or similar patent protection covering our products in all jurisdictions where wefile patent applications.

The patent positions of biopharmaceutical companies generally are highly uncertain and involve complexlegal and factual questions for which legal principles remain unresolved. As a result, the patentapplications that we own or license may fail to result in issued patents with claims that cover our productcandidates in the United States or in other foreign countries for many reasons. There is no assurance thatall potentially relevant prior art relating to our patents and patent applications has been found, consideredor cited during patent prosecution, which can be used to invalidate a patent or prevent a patent fromissuing from a pending patent application. Even if patents do successfully issue, and even if such patentscover our product candidates, third parties may challenge their validity, enforceability or scope, which mayresult in such patent claims being narrowed, found unenforceable or invalidated. Furthermore, even if theyare unchallenged, our patents and patent applications may not adequately protect our intellectualproperty, provide exclusivity for our product candidates or prevent others from designing around ourclaims. Any of these outcomes could impair our ability to prevent competitors from using the technologiesclaimed in any patents issued to us, which may have an adverse impact on our business.

Patents granted by the European Patent Office may be opposed by any person within nine months fromthe publication of their grant and, in addition, may be challenged before national courts at any time.

Furthermore, even if they are unchallenged, our patents and patent applications may not adequatelyprotect our intellectual property or prevent others from designing around our claims. If the breadth orstrength of protection provided by the patents and patent applications we hold, license or pursue withrespect to our product candidates is threatened, it could threaten our ability to prevent third parties fromusing the same technologies that we use in our product candidates. In addition, recent changes to thepatent laws of the United States provide additional procedures for third parties to challenge the validity ofissued patents based on patent applications filed after March 15, 2013. If the breadth or strength ofprotection provided by the patents and patent applications we hold or pursue with respect to our current orfuture product candidates is challenged, then it could threaten our ability to prevent competitive productsfrom using our proprietary technology. Further, because patent applications in the United States and mostother countries are confidential for a period of time, typically for 18 months after filing, we cannot becertain that we were the first to either (i) file any patent application related to our product candidates or (ii)invent any of the inventions claimed in our patents or patent applications. Furthermore, for applicationsfiled before March 16, 2013 or patents issuing from such applications, an interference proceeding can beprovoked by a third party or instituted by the USPTO to determine who was the first to invent any of thesubject matter covered by the patent claims of our applications and patents. If third parties have filed suchapplications after March 15, 2013, a derivation proceeding in the United States can be initiated by suchthird parties to determine whether our invention was derived from theirs.

We do not have any issued patents, but we have filed patent applications, which are currently pending,directed to various aspects of our product candidates. We cannot offer any assurances about which, ifany,

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patents will be issued, the breadth of any such patent or whether any issued patents will be found invalidand unenforceable or will be threatened or infringed by third parties. Any successful actions by thirdparties to challenge the validity or enforceability of any patents that may be issued to us could deprive usof the ability to prevent others from using the technologies claimed in such issued patents.

Further, if we encounter delays in regulatory approvals, the period of time during which we could market aproduct candidate under patent protection could be reduced.

While our business is based primarily on the timing of our biosimilar product launches to occur after theexpiration of relevant patents, we have filed two patent applications directed to our own proprietaryformulations and processes for our product candidates when we have believed securing such patentsmay afford a competitive advantage. For example, the companies that originated Humira and Avastin(AbbVie and Genentech, respectively) own patents directed to formulations for these products. Ratherthan wait for the expiration of these formulation patents, we have developed our own proprietaryformulations for these products that we believe are not covered by valid claims of third party patents,including AbbVie or Genentech’s formulation patents; and we have filed patent applications directed to ourformulations. We cannot guarantee that our proprietary formulations will avoid infringement of third partypatents. Moreover, because competitors may be able to develop their own proprietary productformulations, it is uncertain whether issuance of any of our pending patent applications directed toformulations of adalimumab (Humira) and bevacizumab (Avastin) would cover the formulations of anycompetitors. For example, we are aware that Sandoz is developing biosimilar versions of adalimumab(Humira) and has filed patent applications directed to formulations of adalimumab (Humira). We are alsoaware that Boehringer is developing a biosimilar version of adalimumab (Humira) and has filed a patentapplication directed to formulations of adalimumab (Humira). We have also filed patent applications, noneof which have yet issued, directed to aspects of our downstream manufacturing processes for variousbiosimilars, including ONS-3010. In contrast to our patent applications directed to formulations of ONS-3010, the proprietary technologies embodied in our process-related patent filings, while directed toinventions we believe may provide us with competitive advantage, were not developed by us to avoidthird-party patents. As in the case of our formulation patent filings, it is highly uncertain and we cannotpredict whether our patent filings on process enhancements will afford us a competitive advantageagainst third parties.

Obtaining and maintaining our patent protection depends on compliance with various proceduralrequirements, document submissions, fee payment and other requirements imposed bygovernmental patent agencies. Our patent protection could be reduced or eliminated for non-compliance with these requirements.

The USPTO and various foreign governmental patent agencies require compliance with a number ofprocedural, documentary, fee payment and other provisions during the patent process. In many cases, aninadvertent lapse can be cured by payment of a late fee or by other means in accordance with theapplicable rules. However, there are situations in which noncompliance can result in abandonment orlapse of a patent or patent application, resulting in partial or complete loss of patent rights in the relevantjurisdiction. In such an event, competitors might be able to enter the market earlier than would otherwisehave been the case.

We may not be able to protect our intellectual property rights throughout the world.

Filing, prosecuting, defending and enforcing patents on product candidates in all countries throughout theworld would be prohibitively expensive, and our intellectual property rights in some countries outside theUnited States can be less extensive than those in the United States. In addition, the laws of some foreigncountries do not protect intellectual property rights to the same extent as federal and state laws in theUnited States. Further, licensing partners may choose not to file patent applications in certain jurisdictionsin which we may obtain commercial rights, thereby precluding the possibility of later obtaining patentprotection in these countries. Consequently, we may not be able to prevent third parties from practicingour inventions in all countries outside the United States or importing products made using our inventionsinto the United States or other jurisdictions. Competitors may use our technologies in jurisdictions wherewe have not obtained patent protection to develop their own products and may also export infringingproducts to territories where we have patent protection, but the ability to enforce our patents is not asstrong as that in the United States. These products may compete with our products and our patents orother intellectual property rights may not be effective or sufficient to prevent them from competing.

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Many companies have encountered significant problems in protecting and defending intellectual propertyrights in foreign jurisdictions. The legal systems of certain countries, particularly certain developingcountries, do not favor the enforcement of patents, trade secrets and other intellectual property protection,which could make it difficult for us to stop the infringement of our patents or marketing of competingproducts in violation of our proprietary rights generally. Proceedings to enforce our patent rights in foreignjurisdictions, whether or not successful, could result in substantial costs and divert our efforts andattention from other aspects of our business, could put our patents at risk of being invalidated orinterpreted narrowly and our patent applications at risk of not being approved, and could provoke thirdparties to assert claims against us. We may not prevail in any lawsuits that we initiate and the damages orother remedies awarded, if any, may not be commercially meaningful. Governments of some foreigncountries may force us to license our patents to third parties on terms that are not commerciallyreasonable or acceptable to us. Accordingly, our efforts to enforce our intellectual property rights aroundthe world may be inadequate to obtain a significant commercial advantage from the intellectual propertythat we develop or license.

Changes in U.S. patent law could diminish the value of patents in general, thereby impairing ourability to protect our product candidates.

As is the case with other biopharmaceutical companies, our success is heavily dependent on intellectualproperty, particularly patents. Obtaining and enforcing patents in the biopharmaceutical industry involvesboth technological and legal complexity. Therefore, obtaining and enforcing biopharmaceutical patents iscostly, time-consuming and inherently uncertain. In addition, the United States has recently enacted andis currently implementing wide-ranging patent reform legislation, including the Leahy-Smith AmericaInvents Act, or the America Invents Act, signed into law on September 16, 2011.

As of March 16, 2013, the United States transitioned to a “first-to-file” system for deciding which partyshould be granted a patent when two or more patent applications claiming the same invention are filed bydifferent parties. A third party that files a patent application in the USPTO before us could therefore beawarded a patent covering an invention of ours even if we had made the invention before it was made bythe third party. The change to “first-to-file” from “first-to-invent” is one of the changes to the patent laws ofthe United States resulting from the America Invents Act. Among some of the other significant changes tothe patent laws are changes that limit where a patentee may file a patent infringement suit and provideopportunities for third parties to challenge any issued patent in the USPTO via procedures including post-grant and inter partes review. These adversarial actions at the USPTO review patent claims without thepresumption of validity afforded to U.S. patents in lawsuits in U.S. federal courts, and use a lower burdenof proof than used in litigation in U.S. federal courts. Therefore, it is generally considered easier for acompetitor or third party to have a patent invalidated in a Patent Office post-grant review or inter partesreview proceeding than invalidated in a litigation in a U.S. federal court. If any of our patents arechallenged by a third party in such a USPTO proceeding, there is no guarantee that we or our licensors orcollaborators will be successful in defending the patent, which would result in a loss of the challengedpatent right. It is not yet clear what, if any, impact the America Invents Act will have on the operation ofour business. However, the America Invents Act and its implementation could increase the uncertaintiesand costs surrounding the prosecution of our patent applications and the enforcement or defense of anyissued patents, all of which could harm our business and financial condition.

Further, recent court rulings in cases such as Association for Molecular Pathology v. Myriad Genetics,Inc. (Myriad I); BRCA1- & BRCA2-Based Hereditary Cancer Test Patent Litig., (Myriad II); and PromegaCorp. v. Life Technologies Corp. have narrowed the scope of patent protection available in certaincircumstances and weakened the rights of patent owners in certain situations.

In addition to increasing uncertainty with regard to our ability to obtain patents in the future, thiscombination of events has created uncertainty with respect to the value of patents, once obtained.Depending on future actions by the United States Congress, the Federal Courts and the USPTO, thelaws and regulations governing patents could change in unpredictable ways that would weaken our abilityto obtain new patents or to enforce existing patents and patents that we might obtain in the future.

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If we are unable to maintain effective proprietary rights for our product candidates or any futureproduct candidates, we may not be able to compete effectively in our markets.

While we have filed patent applications to protect certain aspects of our own proprietary formulation andprocess developments, we also rely on trade secret protection and confidentiality agreements to protectproprietary scientific, business and technical information and know-how that is not or may not bepatentable or that we elect not to patent. However, confidential information and trade secrets can bedifficult to protect. Moreover, the information embodied in our trade secrets and confidential informationmay be independently and legitimately developed or discovered by third parties without any improper useof or reference to information or trade secrets. We seek to protect the scientific, technical and businessinformation supporting our operations, as well as the confidential information relating specifically to ourproduct candidates by entering into confidentiality agreements with parties to whom we need to discloseour confidential information, such as, our employees, consultants, board members, contractors, potentialcollaborators and financial investors. However we cannot be certain that such agreements have beenentered into with all relevant parties. We also seek to preserve the integrity and confidentiality of our dataand trade secrets by maintaining physical security of our premises and physical and electronic security ofour information technology systems, but it is possible that these security measures could be breached.While we have confidence in these individuals, organizations and systems, agreements or securitymeasures may be breached and we may not have adequate remedies for any breach. Our confidentialinformation and trade secrets thus may become known by our competitors in ways we cannot prove orremedy.

Although we expect all of our employees and consultants to assign their inventions to us, and all of ouremployees, consultants, advisors and any third parties who have access to our proprietary know-how,information or technology to enter into confidentiality agreements, we cannot provide any assurances thatall such agreements have been duly executed. We cannot guarantee that our trade secrets and otherconfidential proprietary information will not be disclosed or that competitors will not otherwise gain accessto our trade secrets or independently develop substantially equivalent information and techniques. Forexample, any of these parties may breach the agreements and disclose our proprietary information,including our trade secrets, and we may not be able to obtain adequate remedies for such breaches.

Misappropriation or unauthorized disclosure of our trade secrets could impair our competitive position andmay harm our business. Additionally, if the steps taken to maintain our trade secrets are deemedinadequate, we may have insufficient recourse against third parties for misappropriating any trade secret.We cannot guarantee that our employees, former employees or consultants will not file patent applicationsclaiming our inventions. Because of the “first-to-file” laws in the United States, such unauthorized patentapplication filings may defeat our attempts to obtain patents on our own inventions.

We may be subject to claims challenging the inventorship of our patent filings and otherintellectual property.

We may in the future be subject to claims that former employees, collaborators or other third parties havean interest in our patent applications or patents we may be granted or other intellectual property as aninventor or co-inventor. For example, we may have inventorship or ownership disputes arise fromconflicting obligations of consultants or others who are involved in developing our product candidates.Litigation may be necessary to defend against these and other claims challenging inventorship orownership. If we fail in defending any such claims, in addition to paying monetary damages, we may losevaluable intellectual property rights, such as exclusive ownership of or right to use valuable intellectualproperty. Such an outcome could harm our business. Even if we are successful in defending against suchclaims, litigation could result in substantial costs and be a distraction to management and otheremployees.

If we fail to comply with our obligations in the agreements under which we license intellectualproperty and other rights from third parties or otherwise experience disruptions to our businessrelationships with our licensors, we could lose license rights that are important to our business.

We are party to a non-exclusive intellectual property license agreement with Selexis SA, or Selexis,pertaining to cell line expression technology, that is important to our business, and we expect to enter intoadditional license agreements in the future. Our license agreement with Selexis imposes, and we expectthat future license agreements will impose, various milestone payments, royalty payments and otherobligations on us. If we fail to comply with our obligations under these agreements or if we are subject to abankruptcy,

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• the scope of rights granted under the license agreement and other interpretation-related issues;

• the extent to which our technology and processes infringe on intellectual property of the licensorthat is not subject to the licensing agreement;

• the sublicensing of patents and other rights;

• our diligence obligations under the license agreement and what activities satisfy those diligenceobligations;

• the ownership of inventions and know-how resulting from the joint creation or use of intellectualproperty by our licensors and us and our collaborators; and

• the priority of invention of patented technology.

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we may be required to make certain payments to the licensor of our license or the licensor may have theright to terminate the license, in which event we would not be able to develop or market products coveredby the license. Additionally, the milestone and other payments associated with these licenses will make itless profitable for us to develop our product candidates.

In the event we breach any of our obligations under these agreements, we may incur significant liability toour licensing partners. Disputes may arise regarding intellectual property subject to a licensingagreement, including but not limited to:

If disputes over intellectual property and other rights that we have licensed prevent or impair our ability tomaintain our current licensing arrangements on acceptable terms, we may be unable to successfullydevelop and commercialize the affected product candidates and that could harm our business.

We may not be successful in obtaining or maintaining necessary rights to our product candidatesthrough acquisitions and in-licenses.

We currently have rights to certain intellectual property through licenses from third parties, includingSelexis, to develop ONS-3010 and ONS-1045. Because we may find that our programs require the use ofproprietary rights held by third parties, the growth of our business may depend in part on our ability toacquire, in-license or use these proprietary rights. We may be unable to acquire or in-licensecompositions, methods of use, processes or other third party intellectual property rights from third partiesthat we identify as necessary for our product candidates. The licensing and acquisition of third-partyintellectual property rights is a competitive area, and a number of more established companies are alsopursuing strategies to license or acquire third-party intellectual property rights that we may considerattractive. These established companies may have a competitive advantage over us due to their size,financial resources and greater clinical development and commercialization capabilities. In addition,companies that perceive us to be a competitor may be unwilling to assign or license rights to us. We alsomay be unable to license or acquire third-party intellectual property rights on terms that would allow us tomake an appropriate return on our investment.

If we are unable to successfully obtain rights to required third party intellectual property rights or maintainthe existing intellectual property rights we have, we may have to abandon development of that programand our business and financial condition could suffer.

Our ability to market our products in the United States may be significantly delayed or preventedby the BPCIA patent dispute resolution mechanism.

The BPCIA created a new, elaborate and complex patent dispute resolution mechanism for biosimilarsthat could prevent us from launching our product candidates in the United States or could substantiallydelay such launches. This mechanism has been referred to as the “patent dance.” Uncertainty over howcourts will construe the patent dance, for example whether it is the exclusive pathway for litigationinvolving 351(k) biosimilar applications, may cause our assumptions regarding the scope, timing andexpense of patent litigation to be incorrect, and may cause delays in the launch of products subject tosuch litigation.

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• Disclosure of the Biosimilar Application. Within 20 days after receiving a notice from the FDAthat its application has been accepted for review, a 351(k) biosimilar applicant provides a copyof its application information to the RPS. Providing of this information begins the patent dance. Ifthe 351(k) biosimilar applicant chooses not to disclose such information, or opts out of latersteps of the patent dance, the RPS may bring an immediate suit for patent infringement that willproceed under the conventional procedural rules for patent infringement actions.

• Identification of Pertinent Patents. Within 60 days of the date of receipt of the application, theRPS must identify the patents owned or controlled by it that it reasonably believes could beasserted against the biosimilar applicant.

• Statement by the Biosimilar Applicant. Following the receipt of the RPS’s patent list, thebiosimilar applicant must state either that it will not market its product until the relevant patentshave expired or alternatively provide its arguments of stating why the patents are invalid,unenforceable or would not be infringed by the proposed biosimilar product candidate. Thebiosimilar applicant may also provide the RPS with a list of patents it reasonably believes theRPS could assert against the biosimilar product.

• Statement by the RPS. In the event the biosimilar applicant has asserted that the patents areinvalid, unenforceable or would not be infringed by the proposed follow-on product, the RPSmust provide the biosimilar applicant with a response within 60 days. The response mustprovide the legal and factual basis of the opinion that such patent will be infringed by thecommercial marketing of the proposed biosimilar.

• Patent Resolution Negotiations. If the RPS provides its detailed views that the proposedbiosimilar would infringe valid and enforceable patents, then the parties are required to engagein good faith negotiations to identify which of the identified patents will be the subject of a patentinfringement action. If the parties agree on the patents to be litigated, the RPS must bring anaction for patent infringement within 30 days.

• Simultaneous Exchange of Patents. If those negotiations do not result in an agreement within15 days, then the biosimilar applicant must notify the RPS of how many patents (but not theidentity of those patents) that it wishes to litigate. Within five days, the parties are then requiredto exchange lists identifying the patents to be litigated. The number of patents identified by theRPS may not exceed the number provided by the biosimilar applicant. However, if the biosimilarapplicant previously indicated that no patents should be litigated, then the RPS may identify onepatent.

• Commencement of Patent Litigation. The RPS must then commence patent infringementlitigation within 30 days. That litigation will involve all of the patents on the RPS’s list and all ofthe patents on the biosimilar applicant’s list. The biosimilar applicant must then notify the FDA ofthe litigation. The FDA must then publish a notice of the litigation in the Federal Register.

• Notice of Commercial Marketing. If the biosimilar applicant opts out of the patent dance, theBPCIA requires the biosimilar applicant to provide notice to the RPS after FDA licensure, and atleast 180 days in advance of its first commercial marketing of its proposed follow-on biologic. Itis not clear whether the biosimilar applicant must give notice if it complies with the patent dance,but courts may interpret the BPCIA to require such notice. If notice is not given, the RPS mayimmediately commence a patent infringement action on any patent that was listed (or listable) bythe RPS during the dance, but not part of the first wave of patents being litigated. The RPS isallowed to seek a preliminary injunction blocking such marketing based upon any such patents.The litigants are required to “reasonably cooperate to expedite such further discovery as isneeded” with respect to the preliminary injunction motion.

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Currently, the patent dance is not mandatory, although this may change in the future. The patent dancemandates patent disclosure and briefing requirements that are demanding and time-sensitive. Thefollowing is an overview of the patent exchange and patent briefing procedures:

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• we may not be successful in identifying potential customers;

• we may not be able to provide services at an acceptable cost, or at all; and

• we may not generate enough revenue to cover our operating costs.

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Biosimilar companies such as ours have the option of applying for U.S. regulatory approval for ourproducts under either a traditional 351(a) BLA approval route, or under the recently enacted streamlined351(k) approval route established by the BPCIA. The factors underpinning such a decision are extremelycomplex and involve, among other things, balancing legal risk (in terms of, e.g., the degree and timing ofexposure to potential patent litigation by the RPS) against regulatory risks (in terms of, e.g., thedevelopment costs and the differing scope of regulatory approval that may be afforded under 351(a)rather than 351(k)).

A significant legal risk in pursuing regulatory approval under the 351(k) regulatory approval route is thatthe above-summarized patent exchange process established by the BPCIA could result in the initiation ofpatent infringement litigation prior to FDA approval of a 351(k) application, and such litigation could resultin blocking the market entry of our products. In particular, while the 351(k) route is more attractive to us(rather than 351(a)) for reasons related to development time and costs and the potential broader scope ofeventual regulatory approval for our biosimilar product candidates, the countervailing risk in such aregulatory choice is that the complex patent exchange process mandated by the BPCIA could ultimatelyprevent or substantially delay us from launching our products in the United States.

Preparing for and conducting the patent exchange, briefing and negotiation process outlined above willrequire extraordinarily sophisticated legal counseling and extensive planning, all under extremely tightdeadlines. Moreover, it may be difficult for us to secure such legal support if large, well-funded RPSs havealready entered into engagements with highly qualified law firms or if the most highly qualified law firmschoose not to represent biosimilar applicants due to their long standing relationships with RPSs.

Furthermore, we could be at a serious disadvantage in this process as an RPS, such as AbbVie (in thecase of ONS-3010) or Genentech (in the case of ONS-1045 or ONS-1050), may be able to applysubstantially greater legal and financial resources to this process than we could.

Whether courts will view the BPCIA process as the sole avenue for a biosimilar entity and the RPS toidentify and potentially litigate such patents remains uncertain, although a Federal Circuit panel hasrecently held that a biosimilar applicant may opt out of the patent dance. A binding and non-reviewablejudicial determination to that effect could increase patent infringement risks for companies, including ours,seeking to introduce biosimilar versions of reference products.

If we file a 351(k) regulatory approval application for one or more of our products, we may consider itnecessary or advisable to adopt the strategy of selecting one or more patents of the RPS to litigate in theabove described BPCIA process (for example in the third and seventh steps of the process, as outlinedabove), either to assert our non-infringement of such patents or to challenge their validity; but we mayultimately not be successful in that strategy and could be prevented from marketing the product in theUnited States.

The complex, untested and uncertain rules of the BPCIA patent provisions, coupled with the inherentuncertainty surrounding the legal interpretation of any RPS patents that might be asserted against us inthis new process, may significantly delay or defeat our ability to market our products in the United States.

Risks Related to Our Business Operations

We may not be successful in our efforts to begin selling contract development and manufacturingservices.

The success of our business depends upon our ability to identify, develop and commercialize contractdevelopment and manufacturing customers. Selling our services to these customers will require significantefforts to identify customers with development stage products that would benefit from our capabilities. Ourefforts may fail to generate revenues for a number of reasons, including but not limited to the following:

If any of these events occur, we may be forced to abandon our contract development and manufacturingefforts, which would harm our business and could potentially cause us to cease operations.

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• we may not be successful in identifying potential product candidates that pass our strictscreening criteria;

• we may not be able to overcome technological hurdles to development or a product candidatemay not be capable of producing commercial quantities at an acceptable cost, or at all;

• we may not be successful in identifying a reference product as to which we can determine howto create a biosimilar;

• we may not be able to assemble sufficient resources to acquire or discover additional productcandidates;

• our product candidates may not succeed in preclinical or clinical testing;

• our potential product candidates may fail to show sufficient biosimilarity to reference molecules;and

• competitors may develop alternatives that render our product candidates obsolete or lessattractive or the market for a product candidate may change such that a product candidate maynot justify further development.

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We may not be successful in our efforts to identify, develop or commercialize additional productcandidates.

Although a substantial amount of our effort will focus on the continued clinical testing, potential approvaland commercialization of our existing product candidates, the success of our business also depends uponour ability to identify, develop and commercialize additional product candidates. Research programs toidentify new product candidates require substantial technical, financial and human resources. We mayfocus our efforts and resources on potential programs or product candidates that ultimately prove to beunsuccessful. Our development efforts may fail to yield additional product candidates suitable for clinicaldevelopment and commercialization for a number of reasons, including but not limited to the following:

If any of these events occur, we may be forced to abandon our development efforts for a program orprograms or we may not be able to identify, develop or commercialize additional product candidates,which would harm our business and could potentially cause us to cease operations.

We expect to incur significant increased costs as a result of operating as a public company, andour management is required to devote substantial time to new compliance initiatives.

As a newly public company, we expect to incur significant legal, accounting and other expenses that wedid not incur as a private company. In addition, the Sarbanes-Oxley Act of 2002, or the Sarbanes-OxleyAct, as well as rules subsequently implemented by the Securities and Exchange Commission, or SEC,and the NASDAQ Global Market, or NASDAQ, have imposed various requirements on public companies.In July 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act, or the Dodd-Frank Act,was enacted. There are significant corporate governance and executive compensation related provisionsin the Dodd-Frank Act that require the SEC to adopt additional rules and regulations in these areas suchas “say on pay” and pay parity. Recent legislation permits smaller “emerging growth companies” such asour company to implement many of these requirements over a longer period and up to five years from thedate of pricing of our May 2016 initial public offering. We intend to take advantage of this new legislationbut cannot guarantee that we will not be required to implement these requirements sooner than budgetedor planned and thereby incur unexpected expenses. Stockholder activism, the current politicalenvironment and the current high level of government intervention and regulatory reform may lead tosubstantial new regulations and disclosure obligations, which may lead to additional compliance costs andimpact the manner in which we operate our business in ways we cannot currently anticipate. Ourmanagement and other personnel will need to devote a substantial amount of time to these complianceinitiatives. Moreover, these rules and regulations will increase our legal and financial compliance costsand will make some activities more time-consuming and costly. For example, we expect these rules andregulations to make it more difficult and more expensive for us to obtain director and officer liabilityinsurance and we may be required to incur substantial costs to maintain our current levels of suchcoverage.

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The Sarbanes-Oxley Act requires, among other things, that we maintain effective internal controls forfinancial reporting and disclosure controls and procedures. In particular, beginning with this form 10-K forthe year ended September 30, 2017 we were required to perform system and process evaluation andtesting of our internal controls over financial reporting to allow management to report, on the effectivenessof our internal controls over financial reporting by Section 404 of the Sarbanes-Oxley Act, or Section 404.Our testing may reveal deficiencies in our internal controls over financial reporting that are deemed to bematerial weaknesses. Our compliance with Section 404 will require that we incur substantial accountingexpense and expend significant management efforts. We currently do not have an internal audit groupand rely on independent contractors for control monitoring and for the preparation and review of ourconsolidated financial statements. We are actively seeking additional accounting and financial staff withappropriate public company experience and technical accounting knowledge to augment our current staff.Moreover, if we are not able to comply with the requirements of Section 404 in a timely manner or if weidentify or our independent registered public accounting firm identifies deficiencies in our internal controlsover financial reporting that are deemed to be material weaknesses, the market price of our stock coulddecline and we could be subject to sanctions or investigations by NASDAQ, the SEC or other regulatoryauthorities, which would require additional financial and management resources.

New laws and regulations as well as changes to existing laws and regulations affecting public companies,including the provisions of the Sarbanes-Oxley Act and rules adopted by the SEC and by NASDAQ,would likely result in increased costs to us as we respond to their requirements.

We are highly dependent on the services of our key executives and personnel, including ourChairman, President and Chief Executive Officer, Pankaj Mohan, Ph.D., and if we are not able toretain these members of our management or recruit additional management, clinical and scientificpersonnel, our business will suffer.

We are highly dependent on the principal members of our management and scientific and technical staff,particularly, our Chairman, President and Chief Executive Officer, Dr. Mohan. The loss of service of any ofour management or key scientific and technical staff could harm our business. In addition, we aredependent on our continued ability to attract, retain and motivate highly qualified additional management,clinical and scientific personnel. If we are not able to retain our management and to attract, on acceptableterms, additional qualified personnel necessary for the continued development of our business, we maynot be able to sustain our operations or grow.

We may not be able to attract or retain qualified personnel in the future due to the intense competition forqualified personnel among biotechnology, pharmaceutical and other businesses. Our industry hasexperienced a high rate of turnover of management personnel in recent years. If we are not able to attract,retain and motivate necessary personnel to accomplish our business objectives, we may experienceconstraints that will significantly impede the achievement of our development objectives, our ability toraise additional capital and our ability to implement our business strategy.

Our future performance will also depend, in part, on our ability to successfully integrate newly hiredexecutive officers into our management team and our ability to develop an effective working relationshipamong senior management. Our failure to integrate these individuals and create effective workingrelationships among them and other members of management could result in inefficiencies in thedevelopment and commercialization of our product candidates, harming future regulatory approvals, salesof our product candidates and our results of operations. Additionally, we do not currently maintain “keyperson” life insurance on the lives of our executives or any of our employees.

We will need to expand our organization and we may experience difficulties in managing thisgrowth, which could disrupt our operations.

As of September 30, 2017, we had 48 full-time employees. As our development and commercializationplans and strategies develop, we expect to need additional managerial, operational, sales, marketing,financial, legal and other resources. Our management may need to divert a disproportionate amount of itsattention away from our day-to-day operations and devote a substantial amount of time to managingthese growth activities. We may not be able to effectively manage the expansion of our operations, whichmay result in weaknesses in our infrastructure, operational inefficiencies, loss of business opportunities,loss of employees and reduced productivity among remaining employees. Our expected growth couldrequire significant

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capital expenditures and may divert financial resources from other projects, such as the development ofour current and potential future product candidates. If our management is unable to effectively manageour growth, our expenses may increase more than expected, our ability to generate and grow revenuecould be reduced and we may not be able to implement our business strategy. Our future financialperformance and our ability to commercialize product candidates and compete effectively will depend, inpart, on our ability to effectively manage any future growth.

Our Chief Executive Officer and Chairman and a former member of our board of directors, aredirectors of Sonnet Biotherapeutics, Inc. In addition, there is significant overlap between ourcurrent common stockholders and the shareholders of Sonnet. Their interests may conflict withthose of our other stockholders.

On April 6, 2015, pursuant to a contribution agreement, we contributed certain of our assets, unrelated toour biosimilar business, to Sonnet Biotherapeutics, Inc., or Sonnet, a company focused on thedevelopment of bi- or tri-specific antibody fragments that have potential utility in oncology, in exchange forall of Sonnet’s outstanding equity interests. We then distributed the equity interests to our stockholders ona pro rata basis. Pankaj Mohan, Ph.D., who is our Chairman, President and Chief Executive Officer, andDonald J. Griffith, our former Chief Financial Officer and a former member of our board of directors,currently serve as members of the board of directors of Sonnet. In addition, Mr. Griffith serves as thePresident, Chief Executive Officer and Treasurer of Sonnet. Dr. Mohan does not intend to resign from hisrespective positions in Sonnet. In addition, Dr. Mohan currently holds greater than 50% of the outstandingcapital stock of Sonnet. These relationships could result in conflicts of interest between their obligations toour company and Sonnet. In addition, there is significant overlap between our current stockholders andthe shareholders of Sonnet. Sonnet’s interests and the interests of its shareholders may be different fromours or those of our other stockholders and this could result in conflicts. The resolution of any of theseconflicts may not always be in our or your best interest.

Healthcare legislative reform measures may harm our business and results of operations.

In the United States, there have been and continue to be a number of legislative initiatives to improve theaccess to and quality of healthcare, and to contain healthcare costs. For example, in March 2010, thePatient Protection and Affordable Care Act, as amended by the Health Care and Education ReconciliationAct of 2010, or together, the Affordable Care Act, was passed, which substantially changes the wayhealth care is financed by both governmental and private insurers and significantly impacts theU.S.pharmaceutical industry. The Affordable Care Act, among other things, imposes a new methodologyby which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated fordrugs that are inhaled, infused, instilled, implanted or injected, increases the minimum Medicaid rebatesowed by manufacturers under the Medicaid Drug Rebate Program, extends the rebate program toindividuals enrolled in Medicaid managed care organizations, adds a provision to increase the Medicaidrebate for line extensions or reformulated drugs, establishes annual fees and taxes on manufacturers andimporters of certain branded prescription drugs and biologic agents, and promotes a new Medicare Part Dcoverage gap discount program. The Affordable Care Act also expands eligibility for Medicaid programsand introduced a new Patient Centered Outcomes Research Institute to oversee, identify priorities in, andconduct comparative clinical effectiveness research, along with funding for such research. There havebeen judicial and congressional challenges to certain aspects of the Affordable Care Act, and we expectthere will be additional challenges and amendments to the Affordable Care Act in the future particularly inthe light of the pending change in administrations following the 2016 U.S. presidential election.

In addition, other legislative changes have been proposed and adopted in the United States since theAffordable Care Act was enacted. For example, on August 2, 2011, the Budget Control Act of 2011,among other things, created measures for spending reductions by Congress. A Joint Select Committeeon Deficit Reduction, tasked with recommending a targeted deficit reduction of at least $1.2 trillion forthe years 2012 through 2021, was unable to reach required goals, thereby triggering the legislation’sautomatic reduction to several government programs. This includes aggregate reductions of Medicarepayments to providers up to 2% per fiscal year, which went into effect on April 1, 2013 and will stay ineffect through 2025 unless additional Congressional action is taken. Additionally, on January 2, 2013,President Obama signed into law the American Taxpayer Relief Act of 2012, which among other things,further reduced Medicare payments to certain providers, including physicians, hospitals and cancertreatment centers. In addition, there has

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• the federal Anti-Kickback Statute, which prohibits, among other things, persons and entities fromknowingly and willfully soliciting, receiving, offering or paying remuneration, directly or indirectly,in cash or in kind, to induce, reward, or in return for either the referral of an individual for, or thepurchase, recommendation, order or furnishing of an item or service reimbursable, in whole or inpart, under a federal healthcare program, such as the Medicare and Medicaid programs;

• federal civil and criminal false claims laws and civil monetary penalty laws, including the civilFalse Claims Act, which prohibit, among other things, individuals or entities from knowinglypresenting or causing to be presented claims for payment from Medicare, Medicaid or othergovernment health programs that are false or fraudulent and which may apply to entities thatprovide coding and billing advice to customers;

• the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which createdadditional federal criminal statutes that prohibit, among other things, executing a scheme todefraud any healthcare benefit program and making false statements relating to healthcarematters;

• HIPAA, as amended by the Health Information Technology for Economic and Clinical HealthAct, and its implementing regulations, which imposes certain requirements, including mandatorycontractual terms, relating to the privacy, security and transmission of individually identifiablehealth information on health plans, certain healthcare providers, and healthcare clearinghouses,and their business associates;

• the federal legislation commonly referred to as the Physician Payments Sunshine Act under theAffordable Care Act, which requires certain manufacturers of drugs, devices, biologics andmedical supplies for which payment is available under Medicare, Medicaid, or the Children’sHealth Insurance Program, with specific exceptions, to report annually to the Centers forMedicare & Medicaid Services information related to payments and other transfers of valuemade by such manufacturers to physicians and teaching hospitals and ownership andinvestment interests held by physicians and their immediate family members and applicablegroup purchasing organizations; and

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been heightened governmental scrutiny recently over the manner in which drug manufacturers set pricesfor their marketed products, which have resulted in several Congressional inquiries and proposed billsdesigned to, among other things, bring more transparency to product pricing, review the relationshipbetween pricing and manufacturer patient programs, and reform government program reimbursementmethodologies for drug products.

We expect that the Affordable Care Act, as well as other healthcare reform measures that may beadopted in the future, may result in more rigorous coverage criteria and lower reimbursement, andadditional downward pressure on the price that we receive for any approved product. Any reduction inreimbursement from Medicare or other government-funded programs may result in a similar reduction inpayments from private payors. The implementation of cost containment measures or other healthcarereforms could result in reduced demand for our product candidates or additional pricing pressures, andmay prevent us from being able to generate revenue, attain profitability or commercialize our drugs.

We may be subject, directly or indirectly, to federal and state healthcare laws and regulations,including fraud and abuse, false claims, physician payment transparency and health informationprivacy and security laws. If we are unable to comply or have not fully complied with such laws,we could face substantial penalties.

Our operations may be directly or indirectly through our customers subject to various federal and statefraud and abuse laws, including without limitation, the federal Anti-Kickback Statute, the federal FalseClaims Act and physician sunshine laws and regulations. These laws may impact, among other things,our clinical research, proposed sales, marketing and education programs. In addition, we may be subjectto patient data privacy and security regulation by both the federal government and the states in which weconduct our business. The healthcare laws that may affect our ability to operate include but are not limitedto:

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• analogous state and foreign laws and regulations, such as anti-kickback and false claims lawsthat may apply to items or services reimbursed by any third-party payor, including commercialinsurers; state laws that require pharmaceutical companies to comply with the pharmaceuticalindustry’s voluntary compliance guidelines and the relevant compliance guidance promulgatedby the federal government or otherwise restrict payments that may be made to healthcareproviders and other potential referral sources; state laws that require drug manufacturers toreport information related to payments and other transfers of value to physicians and otherhealthcare providers or marketing expenditures; and state laws governing the privacy andsecurity of health information in certain circumstances, many of which differ from each other insignificant ways and may not have the same effect, thus complicating compliance efforts.

• multiple, conflicting and changing laws and regulations such as privacy regulations, tax laws,export and import restrictions, employment laws, regulatory requirements and othergovernmental approvals, permits and licenses;

• failure by us or our collaboration partners to obtain and maintain regulatory approvals for the useof our products in various countries;

• additional potentially relevant third-party patent rights;

• complexities and difficulties in obtaining protection and enforcing our intellectual property;

• difficulties in staffing and managing foreign operations by us or our collaboration partners;

• complexities associated with managing multiple payor reimbursement regimes, governmentpayors or patient self-pay systems by our collaboration partners;

• limits in our or our collaboration partners’ ability to penetrate international markets;

• financial risks, such as longer payment cycles, difficulty collecting accounts receivable, theimpact of local and regional financial crises on demand and payment for our products andexposure to foreign currency exchange rate fluctuations;

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Because of the breadth of these laws and the narrowness of the statutory exceptions and safe harborsavailable, it is possible that some of our business activities could be subject to challenge under one ormore of such laws. In addition, recent healthcare reform legislation has strengthened these laws. Forexample, the Affordable Care Act, among other things, amends the intent requirement of the federal anti-kickback and criminal healthcare fraud statutes. A person or entity no longer needs to have actualknowledge of these statutes or specific intent to violate them in order to commit a violation. Moreover, theAffordable Care Act provides that the government may assert that a claim including items or servicesresulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim forpurposes of the civil False Claims Act.

If our operations are found to be in violation of any of the laws described above or any other governmentalregulations that apply to us, we may be subject to penalties, including civil and criminal penalties,damages, fines, exclusion from participation in government healthcare programs, such as Medicare andMedicaid, imprisonment, disgorgement, contractual damages, reputational harm, diminished profits andfuture earnings, additional reporting requirements and oversight if we become subject to a corporateintegrity agreement or similar agreement to resolve allegations of non-compliance with these laws, andthe curtailment or restructuring of our operations, any of which could adversely affect our ability to operateour business and our results of operations. Defending against any such actions can be costly, time-consuming and may require significant financial and personnel resources.

Therefore, even if we are successful in defending against any such actions that may be brought againstus, our business may be impaired.

The international aspects of our business expose us to business, regulatory, political,operational, financial and economic risks associated with doing business outside of the UnitedStates.

We currently have limited international operations of our own and have a number of internationalcollaborations. Doing business internationally involves a number of risks, including but not limited to:

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• natural disasters, political and economic instability, including wars, terrorism and political unrest,outbreak of disease, boycotts, curtailment of trade and other business restrictions;

• certain expenses including, among others, expenses for travel, translation and insurance; and

• regulatory and compliance risks that relate to maintaining accurate information and control oversales and activities that may fall within the purview of the U.S. Foreign Corrupt Practices Act, itsbooks and records provisions or its anti-bribery provisions.

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If we fail to comply with environmental, health and safety laws and regulations, we could becomesubject to fines or penalties or incur costs that could harm our business.

Our research, development and manufacturing activities and our third-party suppliers’ activities involve thecontrolled storage, use and disposal of hazardous materials, including the components of our productcandidates and other hazardous compounds. We and our suppliers are subject to laws and regulationsgoverning the use, manufacture, storage, handling and disposal of these hazardous materials. In somecases, these hazardous materials and various wastes resulting from their use are stored at our facilitiespending their use and disposal. We cannot eliminate the risk of contamination, which could cause aninterruption of our commercialization efforts, research, development and manufacturing efforts andbusiness operations, and environmental damage resulting in costly clean-up and liabilities underapplicable laws and regulations governing the use, storage, handling and disposal of these materials andspecified waste products. Although we believe that the safety procedures utilized by us for handling anddisposing of these materials generally comply with the standards prescribed by these laws andregulations, we cannot guarantee that this is the case or eliminate the risk of accidental contamination orinjury from these materials. In such an event, we may be held liable for any resulting damages and suchliability could exceed our resources and state or federal or other applicable authorities may curtail our useof certain materials and/or interrupt our business operations. Furthermore, environmental laws andregulations are complex, change frequently and have tended to become more stringent. We cannotpredict the impact of such changes and cannot be certain of our future compliance. We do not currentlycarry biological or hazardous waste insurance coverage.

Risks Related to Ownership of Our Securities

Our common stock may be delisted from the Nasdaq and begin trading in the over-the-countermarkets if we are not successful in regaining compliance with the Nasdaq’s continued listingstandards, which may negatively impact the price of our common stock and our ability to accessthe capital markets.

On June 28, 2017, we received written notification from the Nasdaq Stock Market, or Nasdaq, indicatingthat as of June 28, 2017, we did not meet the $50.0 million minimum market value of listed securitiesrequired to maintain continued listing under its rules, and that as of June 28, 2017, we did not meet thealternative requirements of minimum stockholders’ equity or total assets/total revenue. Under NasdaqRules, we had 180 calendar days from the date of the notification to regain compliance by meeting thecontinued listing requirement, namely the market value of listed securities closes at $50,000,000 or morefor a minimum of 10 consecutive business days. Because we were unable to regain compliance duringthe 180-day period, we anticipate that we will receive a delisting determination from Nasdaq, followingwhich we anticipate requesting a hearing to remain on the Nasdaq Global Market. If granted, such requestwill ordinarily suspend such delisting determination until a decision by Nasdaq subsequent to the hearing.

Although we intend to request a hearing, which stays the delisting, we cannot be certain of any outcomeor if we will be given additional time to regain compliance. If we are not successful, we anticipate that ourcommon stock would begin trading on the over-the-counter market. Delisting from Nasdaq and trading onthe over-the-counter market could adversely affect the liquidity of our common stock and result in adeemed liquidation event under the terms of our recently issued Series A Convertible. Stocks traded onthe over-the-counter market generally have limited trading volume and exhibit a wider spread between thebid/ask quotation, as compared to securities listed on a national securities exchange. Consequently, youmay not be able to liquidate your investment in the event of an emergency or for any other reason.

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• The requirement to redeem the Series A Convertible at (x) 120% of the stated value plus (y)120% of any unpaid but accrued preferred dividends plus (z) any unpaid participating dividends;

• A limited availability of market quotations for our common stock;

• A reduced amount of news and analyst coverage for us;

• A decreased ability to issue additional securities or obtain additional financing in the future;

• Reduced liquidity for our stockholders;

• Potential loss of confidence by partners and employees; and

• Loss of institutional investor interest and fewer business development opportunities.

• the success of competitive services, products or technologies;

• adverse results or delays in preclinical or clinical trials;

• any inability to obtain additional funding;

• any delay in filing an IND, BLA or other regulatory submission for any of our product candidatesand any adverse development or perceived adverse development with respect to the applicableregulatory agency’s review of that IND, BLA or other regulatory submission;

• the perception of limited market sizes or pricing for our product candidates;

• failure to successfully develop and commercialize our product candidates;

• post-marketing safety issues relating to our product candidates or biosimilars generally;

• failure to maintain our existing strategic collaborations or enter into new collaborations;

• failure by us or our licensors and strategic collaboration partners to prosecute, maintain orenforce our intellectual property rights;

• changes in laws or regulations applicable to our products;

• any inability to obtain adequate product supply for our product candidates or the inability to do soat acceptable prices;

• adverse regulatory decisions;

• introduction of new products, services or technologies by our competitors, including biosimilars,interchangeable biosimilars, and biobetter versions of the same molecules we are targeting;

• failure to meet or exceed financial projections we may provide to the public;

• failure to meet or exceed the financial projections of the investment community;

• the perception of the pharmaceutical industry by the public, legislatures, regulators and theinvestment community;

• announcements of significant acquisitions, strategic partnerships, joint ventures or capitalcommitments by us, our strategic collaboration partners or our competitors;

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If our common stock is delisted from the Nasdaq, we could face significant material adverseconsequences, including:

The trading price of our securities is likely to be volatile, and purchasers of our securities couldincur substantial losses.

The market price of our securities is likely to be volatile. The stock market in general and the market inwhich we operate have experienced extreme volatility that has often been unrelated to the operatingperformance of particular companies. As a result of this volatility, investors may not be able to sell theirsecurities at a profit. The market price of our securities could be subject to wide fluctuations in response toa variety of factors, including but not limited to:

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• disputes or other developments relating to proprietary rights, including patents, litigation mattersand our ability to obtain patent protection for our technologies;

• additions or departures of key scientific or management personnel;

• significant lawsuits, including stockholder litigation and litigation filed by us or filed against uspertaining to patent infringement or other violations of intellectual property rights;

• the outcomes of any citizens petitions filed by parties seeking to restrict or limit the approval ofbiosimilar products;

• if securities or industry analysts do not publish research or reports about our business or if theyissue an adverse or misleading opinion regarding our stock;

• changes in the market valuations of similar companies;

• general economic, industry or market conditions;

• sales of our securities by us or our stockholders in the future;

• trading volume of our securities;

• issuance of patents to third parties that could prevent our ability to commercialize our productcandidates;

• reductions in the prices of reference products that could reduce the overall market opportunityfor our product candidates intended as biosimilars to such reference products;

• the loss of one or more employees constituting our leadership team;

• changes in biosimilar regulatory requirements that could make it more difficult for us to developour product candidates; and

• the other factors described in this “Risk Factors” section.

• our ability to successfully initiate and provide contract development and manufacturing services;

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In addition, biopharmaceutical companies in particular have experienced extreme price and volumefluctuations that have often been unrelated or disproportionate to the operating performance of thesecompanies. Broad market and industry factors may negatively affect the market price of our securities,regardless of our actual operating performance.

GMS Tenshi has beneficial ownership of a significant percentage of our common stock, has theright to designate a majority of our board of directors, and is able to exert significant control overmatters subject to stockholder approval, preventing new investors from influencing significantcorporate decisions.

On October 31, 2017, we closed the sale of the remaining shares of Series A Convertible Preferred Stock,par value $0.01 per share, or Series A Convertible, for an aggregate 250,000 shares of Series AConvertible (which are currently convertible into 37,795,948 shares of our common stock) and warrants toacquire 16,750,000 shares of our common stock being issued to GMS Tenshi. GMS Tenshi currentlybeneficially owns approximately 68.6 % of our common stock, and controls 60.2 % of our outstandingvoting power. Under the investor rights agreement with GMS Tenshi, GMS Tenshi also currently has thepower to designate a majority of our board of directors, and four of our seven board members weredesignated by GMS Tenshi. GMS Tenshi’s interests may not coincide with the interests of othersecurityholders GMS Tenshi has the ability to influence our company through both its ownership positionand control of our board of directors, which may prevent or discourage unsolicited acquisition proposals oroffers for our capital stock that you may believe are in your best interest as one of our securityholders.

Our quarterly operating results may fluctuate significantly or may fall below the expectations ofinvestors or securities analysts, each of which may cause our stock price to fluctuate or decline.

Our quarterly operating results may fluctuate significantly, which makes it difficult for us to predict ourfuture operating results. These fluctuations may occur due to a variety of factors, many of which are out ofour control and may be difficult to predict, including but not limited to:

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• our ability to successfully develop, market and sell ONS-3010, ONS-1045, ONS-1050 and ourother product candidates;

• the cost of clinical development for ONS-3010, ONS-1045 and ONS-1050;

• the success of competitive products or technologies;

• results of clinical trials of our product candidates or those of our competitors;

• developments or disputes concerning patent applications, issued patents or other proprietaryrights;

• the recruitment or departure of key personnel;

• the level of expenses related to any of our product candidates or clinical development programs;

• the results of our efforts to discover, develop, manufacture, acquire or in-license additionalproduct candidates;

• actual or anticipated changes in estimates as to financial results, development timelines orrecommendations by securities analysts;

• variations in our financial results or those of companies that are perceived to be similar to us;

• market conditions in the pharmaceutical and biotechnology sectors;

• general economic, industry and market conditions; and

• the other factors described in this “Risk Factors” section.

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If our quarterly operating results fall below the expectations of investors or securities analysts, the marketprice of our securities could decline substantially. Furthermore, any quarterly fluctuations in our operatingresults may, in turn, cause the price of our securities to fluctuate substantially. We believe that quarterlycomparisons of our financial results are not necessarily meaningful and should not be relied upon as anindication of our future performance.

If securities or industry analysts do not publish research, or publish unfavorable research, aboutour business, the market price of our securities and trading volume could decline.

The trading market for our securities will depend in part on the research and reports that securities orindustry analysts publish about us or our business, our market and our competitors. We do not have anycontrol over these analysts. If one or more of the analysts who cover us downgrade our securities orchange their opinion of our securities, the market price of our securities would likely decline. If one or moreof these analysts cease coverage of our company or fail to regularly publish reports on us, we could losevisibility in the financial markets, which could cause the market price of our securities or trading volume todecline.

We are an “emerging growth company” and, due to the reduced reporting requirements applicableto emerging growth companies, certain investors may find investing in our securities lessattractive.

We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012, orthe JOBS Act. For as long as we continue to be an emerging growth company, we may take advantage ofexemptions from various reporting requirements that are applicable to other public companies that are notemerging growth companies, including not being required to comply with the auditor attestationrequirements of Section 404, reduced disclosure obligations regarding executive compensation in thisprospectus and our periodic reports and proxy statements and exemptions from the requirements ofholding a nonbinding advisory vote on executive compensation and stockholder approval of any goldenparachute payments not previously approved. We could be an emerging growth company for up tofive years, although circumstances could cause us to lose that status earlier, including if the market valueof our common stock held by non-affiliates exceeds $700 million as of March 31 (the end of our secondfiscal quarter) of any fiscal year before that time or if we have total annual gross revenue of  $1.07 billionor more during any fiscal year before that time, in which cases we would no longer be an emerginggrowth company as of the following September 30 (the last day of our fiscal year) or, if we issue morethan $1.0 billion in

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non-convertible debt during any three-year period before that time, we would cease to be an emerginggrowth company immediately. We cannot predict if investors will find our securities less attractivebecause we may rely on this exemption. If some investors find our securities less attractive as a result,there may be a less active trading market for our securities and the market price of our securities may bemore volatile.

We have and will continue to incur significant costs and demands upon management as a resultof complying with the laws and regulations affecting public companies in the United States, whichmay harm our operating results.

As a public company listed in the United States, we have and will continue to incur significant additionallegal, accounting and other expenses. In addition, changing laws, regulations and standards relating tocorporate governance and public disclosure, including regulations implemented by the SEC andNASDAQ, may increase legal and financial compliance costs and make some activities more time-consuming. These laws, regulations and standards are subject to varying interpretations, and as a result,their application in practice may evolve over time as new guidance is provided by regulatory andgoverning bodies. We intend to invest resources to comply with evolving laws, regulations and standards,and this investment may result in increased general and administrative expenses and a diversion ofmanagement’s time and attention from revenue-generating activities to compliance activities. If,notwithstanding our efforts to comply with new laws, regulations and standards, we fail to comply,regulatory authorities may initiate legal proceedings against us, and our business may be harmed.

Further, failure to comply with these laws, regulations and standards might also make it more difficult forus to obtain certain types of insurance, including director and officer liability insurance, and we might beforced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the sameor similar coverage. The impact of these events could also make it more difficult for us to attract and retainqualified persons to serve on our board of directors, on committees of our board of directors or asmembers of senior management.

Due to the speculative nature of warrants, there is no guarantee that it will ever be profitable forholders of the Series A warrants and Series B warrants to exercise such warrants.

The Series A warrants and Series B warrants represent the right to acquire shares of our common stock ata fixed price for a limited period of time. If not exercised prior to their expiration dates, such warrantsexpire and have no further value. In the event the price of a share of our common stock price does notexceed the exercise price of the warrants, such warrants may not have any value. Moreover, the marketvalue of the warrants is uncertain and there can be no assurance that the market value of the warrantswill equal or exceed their initial public offering price. There can be no assurance that the market price ofour common stock will ever equal or exceed the exercise price of the warrants, and, consequently,whether it will ever be profitable for holders of the Series A warrants and Series B warrants to exercisesuch warrants.

Future sales and issuances of our common stock or rights to purchase securities, includingpursuant to our equity incentive plans, exercise of warrants or conversion of outstandingconvertible preferred securities, could result in additional dilution of the percentage ownership ofour stockholders and could cause the market price of our securities to fall.

We will need additional capital in the future to continue our planned operations. To the extent we raiseadditional capital by issuing equity securities, our stockholders may experience substantial dilution. Wemay sell common stock, convertible securities or other equity securities in one or more transactions atprices and in a manner we determine from time to time. If we sell common stock, convertible securities orother equity securities in more than one transaction, investors may be materially diluted by subsequentsales. These sales may also result in material dilution to our existing stockholders, and new investorscould gain rights superior to our existing stockholders.

Pursuant to the 2015 Equity Incentive Plan, or the 2015 Plan, our management is authorized to grantstock options and other equity-based awards to our employees, directors and consultants. Under the 2015Plan, the number of shares of our common stock reserved for issuance as of September 30, 2017 was1,214,309 shares. The number of shares available for future grant under the 2015 Plan will be increasedby (i) the number of shares pursuant to outstanding awards under the 2015 Plan that are forfeited orlapse

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unexercised and which following the effective date are not issued under the 2015 Plan and (ii) an annualincrease on January 1 beginning in 2017 and ending in 2025, equal to 3% of the shares of stockoutstanding as of December 31st of the immediately preceding year, or such smaller number of shares asdetermined by our board of directors. Pursuant to the 2016 Employee Stock Purchase Plan, or the ESPP,which became effective upon the execution of the underwriting agreement related to our initial publicoffering, upon implementation of an offering under the ESPP, eligible employees will be able to acquireshares of our common stock at a discount to the prevailing market price, and an aggregate of 289,855shares were available for issuance under the ESPP as of September 30, 2017. The number of sharesavailable for issuance under the ESPP will automatically increase on the first day of each fiscal yearbeginning in 2016 and ending in 2025, equal to the lesser of  (i) 1% of the shares of common stockoutstanding on December 31st of the immediately preceding calendar year, (ii) 510,145 shares ofcommon stock, subject to adjustments as provided in the ESPP or (iii) such smaller number of shares asdetermined by our board of directors. If our board of directors does not elect to reduce the annualincreases in the number of shares available for future grant under the 2015 Plan or the ESPP, ourstockholders may experience additional dilution, which could cause the market price of our securities tofall.

We also currently have issued and outstanding a number of warrants to purchase shares of our commonstock, as well as shares of our convertible preferred stock, the exercise or conversion of which couldresult in the issuance of a number of shares of our common stock. For example, the 250,000 shares ofour Series A Convertible are currently convertible into an aggregate 37,795,948 shares of our commonstock, which is more than the current number of shares of common stock that are issued and outstanding.

Our ability to use our net operating loss carryforwards and certain other tax attributes may belimited.

We have incurred substantial losses during our history and do not expect to become profitable in the nearfuture, and we may never achieve profitability. To the extent that we continue to generate taxable losses,unused losses will carry forward to offset future taxable income, if any, until such unused losses expire.Under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, if a corporationundergoes an “ownership change,” generally defined as a greater than 50 percentage point change (byvalue) in its equity ownership by certain stockholders over a three-year period, the corporation’s ability touse its pre-change net operating loss carryforwards, or NOLs, and other pre-change tax attributes (suchas research tax credits) to offset its post-change income or taxes may be limited. We may haveexperienced ownership changes in the past and may experience ownership changes in the future as aresult of subsequent shifts in our stock ownership (some of which shifts are outside our control). As aresult, if we earn net taxable income, our ability to use our pre-change NOLs to offset such taxable incomewill be subject to limitations. Similar provisions of state tax law may also apply to limit our use ofaccumulated state tax attributes. In addition, at the state level, there may be periods during which the useof NOLs is suspended or otherwise limited, which could accelerate or permanently increase state taxesowed. As a result, even if we attain profitability, we may be unable to use a material portion of our NOLsand other tax attributes, which could adversely affect our future cash flows.

We do not intend to pay dividends on our capital stock, and as such any returns will be limited tothe value of our securities.

We have never declared or paid any cash dividends on our capital stock. We currently anticipate that wewill retain future earnings for the development, operation and expansion of our business and do notanticipate declaring or paying any cash dividends for the foreseeable future. Any return to securityholderswill therefore be limited to the appreciation of their securities. In addition, our senior secured notes issuedDecember 2016 through May 2017 restrict our ability to pay dividends, and the terms of our Series AConvertible may also act to limit our ability to pay dividends as we may not declare or pay any dividendson our common stock unless we also concurrently declare and set aside for payment or distribution, asapplicable, participating dividends for our Series A Convertible.

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• establishing a classified board of directors so that not all members of our board of directors areelected at one time;

• permitting the board of directors to establish the number of directors and fill any vacancies andnewly created directorships;

• providing that directors may only be removed for cause;

• prohibiting cumulative voting for directors;

• requiring super-majority voting to amend some provisions in our amended and restatedcertificate of incorporation and amended and restated bylaws;

• authorizing the issuance of  “blank check” preferred stock that our board of directors could use toimplement a stockholder rights plan;

• eliminating the ability of stockholders to call special meetings of stockholders; and

• prohibiting stockholder action by written consent, which requires all stockholder actions to betaken at a meeting of our stockholders.

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Provisions in our amended and restated certificate of incorporation and amended and restatedbylaws, as well as provisions of Delaware law, could make it more difficult for a third party toacquire us or increase the cost of acquiring us, even if doing so would benefit our securityholdersor remove our current management.

Our amended and restated certificate of incorporation, amended and restated bylaws, as amended andDelaware law contain provisions that may have the effect of delaying or preventing a change in control ofus or changes in our management. Our charter documents also contain other provisions that could havean anti-takeover effect, such as:

These provisions, alone or together, could delay, deter or prevent hostile takeovers and changes incontrol or changes in our management.

In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203of the Delaware General Corporation Law, which limits the ability of stockholders owning in excess of15% of our outstanding voting stock to merge or combine with us.

Any provision of our amended and restated certificate of incorporation or amended and restated bylaws,as amended or Delaware law that has the effect of delaying or deterring a change in control could limitthe opportunity for our securityholders to receive a premium for their securities and could also affect theprice that some investors are willing to pay for our securities.

Our amended and restated certificate of incorporation and our amended and restated bylaws, asamended, provide that the Court of Chancery of the State of Delaware will be the exclusive forumfor substantially all disputes between us and our stockholders, which could limit ourstockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors,officers or employees.

Our amended and restated certificate of incorporation and our amended and restated bylaws, asamended, provide that the Court of Chancery of the State of Delaware is the exclusive forum for anyderivative action or proceeding brought on our behalf; any action asserting a breach of fiduciary duty; anyaction asserting a claim against us arising pursuant to the Delaware General Corporation Law, ouramended and restated certificate of incorporation or our amended and restated bylaws, as amended; orany action asserting a claim against us that is governed by the internal affairs doctrine. The choice offorum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorablefor disputes with us or our directors, officers or other employees, which may discourage such lawsuitsagainst us and our directors, officers and other employees. If a court were to find the choice of forumprovision contained in our amended and restated certificate of incorporation or in our amended andrestated bylaws, as amended, to be inapplicable or unenforceable in an action, we may incur additionalcosts associated with resolving such action in other jurisdictions, which could harm our business andfinancial condition.

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Item 1B. Unresolved Staff Comments

Not applicable.

Item 2. Properties

Our headquarters are located in Cranbury, New Jersey where we occupy approximately 48,000 squarefeet of office and laboratory space under a lease that expires in June 2021. Additionally, we entered into alease for approximately 82,000 square feet of office and laboratory space in Cranbury, New Jersey, withlease payments that commenced in March 2016 and expire in March 2026.

We believe that our existing facilities are adequate for our current needs. When our leases expire, or if weneed to hire more employees, we may exercise our renewal option or look for additional or alternate spacefor our operations and we believe that suitable additional or alternative space will be available in the futureon commercially reasonable terms.

Item 3. Legal Proceedings

From time to time, we may become involved in litigation relating to claims arising from the ordinary courseof business. Our management believes that there are currently no claims or actions pending against us,the ultimate disposition of which would have a material adverse effect on our results of operations,financial condition or cash flows. We are not currently party to any legal proceedings.

Item 4. Mine Safety Disclosures

Not applicable.

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Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and IssuerPurchases of Equity Securities

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PART II

Market Information

Our units, which comprised one share of our common stock, one-half of a Series A warrant and one-halfof a Series B warrant began trading under the symbol “ONSIU” on the NASDAQ Global Market onMay 13, 2016 in connection with our initial public offering. Following separation of the units, on June 13,2016, our shares of common stock and the Series A warrants and Series B warrants began trading underthe symbols “ONS,” “ONSIW” and “ONSIZ,” respectively, and our units were delisted. Prior to our initialpublic offering, there was no public market for our securities.

The following table sets forth for the periods indicated the high and low closing sales prices of ourcommon stock, Series A warrants and Series B warrants as reported on the NASDAQ Global Market:

Common Stock Series A Warrants Series B Warrants

Fiscal 2017 High Low High Low High Low

Fourth Quarter $2.02 $0.83 $ 0.25 $ 0.02 $ 0.12 $ 0.02Third Quarter $2.53 $0.98 $ 1.67 $ 0.13 $ 0.64 $ 0.05Second Quarter $3.75 $2.65 $ 1.09 $ 0.09 $ 0.90 $ 0.12First Quarter $4.33 $1.89 $ 0.52 $ 0.05 $ 1.20 $ 0.26

Fiscal 2016

Fourth Quarter $5.49 $3.04 $ 0.44 $ 0.41 $ 0.68 $ 0.62Third Quarter (from June 13, 2016) $4.48 $3.25 $ 0.26 $ 0.24 $ 0.72 $ 0.61

On December 27, 2017, the closing sale price of our common stock was $1.16, of our Series A warrantswas $0.05, and of our Series B warrants was $0.05.

Common Stockholders

As of December 27, 2017, there were approximately 133 stockholders of record of our common stock. Theactual number of stockholders is greater than this number of record holders, and includes stockholderswho are beneficial owners, but whose shares are held in street name by brokers and other nominees.This number of holders of record also does not include stockholders whose shares may be held in trust byother entities.

Preferred Stockholders

As of December 27, 2017, there were 250,000 shares of our Series A Convertible Preferred Stock, parvalue $0.01 per share, or the Series A Convertible, issued and outstanding, all of which were held by onerecord holder, GMS Tenshi, and 1,500,000 shares of our Series B Convertible Preferred Stock issued andoutstanding, all of which were held by two record holders.

Series A Warrant and Series B Warrant Holders

As of December 27, 2017, there were two holders of record of our Series A warrants and two holders ofrecord of our Series B warrants. The actual number of warrantholders is greater than this number ofrecord holders, and includes warrantholders who are beneficial owners, but whose warrants are held instreet name by brokers and other nominees. This number of holders of record also does not includewarrantholders whose shares may be held in trust by other entities.

Dividend Policy

We have never declared or paid any cash dividends on our capital stock and do not anticipate paying anycash dividends in the foreseeable future. Payment of cash dividends, if any, in the future will be at thediscretion of our board of directors and will depend on then-existing conditions, including our financial

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condition, operating results, contractual restrictions, capital requirements, business prospects and otherfactors our board of directors may deem relevant. Our outstanding senior secured notes issued inDecember 2016 restrict our ability to pay dividends. The terms of our Series A Convertible may also act tolimit our ability to pay dividends as we may not declare or pay any dividends on our common stock unlesswe also concurrently declare and set aside for payment or distribution, as applicable, participatingdividends for our Series A Convertible.

Securities Authorized for Issuance Under Equity Compensation Plans

The information required by this Item regarding equity compensation plans is incorporated by reference tothe information set forth in Item 12 of this Annual Report on Form 10-K.

Recent Sales of Unregistered Equity Securities

None.

Issuer Purchases of Equity Securities

We did not repurchase any of our equity securities during fiscal year ended September 30, 2017.

Item 6. Selected Financial Data

Not applicable.

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

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The following discussion should be read in conjunction with the consolidated financial statements andnotes thereto included elsewhere in this Annual Report on Form 10-K. This Annual Report on Form 10-K,including the following sections, contains forward-looking statements within the meaning of the federalsecurities laws. These statements are subject to risks and uncertainties that could cause actual resultsand events to differ materially from those expressed or implied by such forward-looking statements. For adetailed discussion of these risks and uncertainties, see the “Risk Factors” section in Item 1A of thisAnnual Report on Form 10-K. We caution the reader not to place undue reliance on these forward-lookingstatements, which reflect management’s analysis only as of the date of this Form 10-K. We undertake noobligation to update forward-looking statements, which reflect events or circumstances occurring after thedate of this Form 10-K.

Overview

We are a clinical-stage biopharmaceutical company focused on identifying, developing, manufacturingand commercializing complex biosimilar therapeutics. Our current focus is on technically challenging andcommercially attractive monoclonal antibodies, or mAbs, in the disease areas of immunology andoncology. A mAb is a type of protein that is produced by a single clone of cells or cell line and made tobind to a specific substance in the body. Our strategy is to cost-effectively develop these biosimilars on anaccelerated timeline, which is fundamental to our success and we believe positions us to be a leadingbiosimilar company. We have leveraged our team’s biopharmaceutical expertise to establish fullyintegrated in-house development and manufacturing capabilities, which we refer to as our BioSymphonyPlatform. We believe this platform addresses the numerous complex technical and regulatory challengesin developing and commercializing mAb biosimilars and was designed to provide significant pricingflexibility. We have advanced two of our product candidates through Phase 1 clinical trials and intopreparations for Phase 3 clinical trials: ONS-3010, a biosimilar to adalimumab (Humira ), and ONS-1045,a biosimilar to bevacizumab (Avastin ). We plan to advance ONS-3010 and ONS-1045 upon entering intoa license or co-development agreement with a partner. Similarly, we are developing other earlier stagebiosimilar development candidates that we intend to take through the pre-clinical stage with the goal ofentering into clinical trials upon securing a development partner for major markets such as the UnitedStates and the EU.

We have made a strategic decision to maximize the value of our BioSymphony Platform to assistdevelopment stage biopharmaceutical and biotechnology companies with the development andmanufacturing of their drug product candidates for clinical trials on a contract basis. We believe that wewill be able to provide a flexible and cost effective alternative to the larger contract manufacturingorganizations currently serving this market.

Through September 30, 2017, we have funded substantially all of our operations through the sale andissuance of  $159.7 million in net proceeds of our equity and debt securities. We have also received$29.0 million pursuant to our collaboration and licensing agreements. In May 2016 we completed theinitial public offering, or IPO, of our securities, through the sale of units. Each unit consisted of one shareof common stock, one-half of a Series A warrant and one-half of a Series B warrant. Each whole Series Awarrant entitles the holder to purchase one share of common stock at an initial exercise price of  $6.60,subject to adjustment. Each whole Series B warrant entitles the holder to purchase one share of commonstock at an initial exercise price of  $8.50, subject to adjustment. The initial public offering price was $6.00per unit. We also completed a private placement of 833,332 shares of common stock, 416,666 Series Awarrants and 416,666 Series B warrants for aggregate gross proceeds of approximately $5.0 million thatclosed concurrent with the IPO. The units separated in accordance with their terms, and ceased trading,and on June 13, 2016, each of the component securities underlying the units (common stock, Series Awarrants and Series B warrants) began trading on the NASDAQ Global Market. We raised net proceedsof approximately $29.2 million from our IPO and an additional $4.6 million of net proceeds from theconcurrent private placement, in each case excluding any proceeds we may receive from the exercise ofthe Series A warrants and Series B warrants. In addition, between December 2016 and May 2017 weissued an aggregate of  $15.0 million of senior secured promissory notes and warrants for cash.Furthermore, in September 2017, we closed on the initial sale of 32,628 shares of our newly-createdSeries A Convertible Preferred Stock, or the Series A Convertible, to GMS Tenshi Holdings Pte. Limited,or GMS Tenshi, for $3.3 million of cash, and entered into an investor rights agreement in connectiontherewith. In

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October 2017, following receipt of necessary stockholder approval, we issued an additional 217,372shares of our Series A Convertible and warrants to acquire 16,750,000 shares of our common stock toGMS Tenshi for $21.7 million of cash, and exchanged an aggregate $1.5 million of outstanding seniorsecured notes into 1,500,000 shares of our newly-created Series B Convertible Preferred Stock, or theSeries B Convertible.

Additionally, as part of the GMS Tenshi transaction, in September 2017, we entered into a jointdevelopment and licensing agreement for ONS-3010 and ONS-1045 in all emerging market territories notpreviously licensed to other development partners.

As described in their audit report included elsewhere in this Annual Report on Form 10-K, our auditorshave included an explanatory paragraph that states that we have incurred recurring losses and negativecash flows from operations since inception and have an accumulated deficit at September 30, 2017 of $186.2 million, $15.0 million of senior secured notes due in December 2018 and $4.6 million ofindebtedness that is due on demand. We will need to raise substantial additional capital to fund ourplanned future operations, commence Phase 3 clinical trials, receive approval for and commercializeONS-3010 and ONS-1045 and continue to develop our other pipeline candidates. We plan to finance ourfuture operations with a combination of proceeds from providing contract development and manufacturingservices on a fee for service basis, the issuance of equity securities, the issuance of additional debt,potential collaborations and revenues from potential future product sales, if any. There are no assurancesthat we will be successful in obtaining an adequate level of financing for the development andcommercialization of ONS-3010, ONS-1045 or any other current or future biosimilar product candidates. Ifwe are unable to secure adequate additional funding, our business, operating results, financial conditionand cash flows may be materially and adversely affected. These matters raise substantial doubt about ourability to continue as a going concern. Our consolidated financial statements do not include anyadjustments that might be necessary if we are unable to continue as a going concern.

Our current cash resources of  $3.2 million as of September 30, 2017, along with the $21.7 million of cashproceeds from our sale of Series A Convertible to GMS Tenshi in October 2017, are expected to fund ouroperations through June 2018. To provide additional working capital, we continue to engage in activediscussions with global and regional pharmaceutical companies for licensing and/or co-developmentrights to our late- and early-stage pipeline product candidates. If we are not successful in raisingadditional capital or entering into one or more licensing and/or co-development rights agreements, we willbe required to scale back our plans and place certain activities on hold.

We do not have any products approved for sale and we have only generated revenue from ourcollaboration agreements. We have incurred operating losses and negative operating cash flows sinceinception and there is no assurance that we will ever achieve profitable operations, and if achieved, thatprofitable operations will be sustained. Our net loss for the year ended September 30, 2017 was $38.8million. We also had a net loss of  $53.3 million for the year ended September 30, 2016. In addition,development activities, clinical and preclinical testing and commercialization of our product candidates willrequire significant additional financing.

Collaboration and License Agreements

From time to time, we enter into collaboration and license agreements for the research and development,manufacture and/or commercialization of our biosimilar products and/or biosimilar product candidates.These agreements generally provide for non-refundable upfront license fees, development andcommercial performance milestone payments, cost sharing, royalty payments and/or profit sharing.

Selexis SA

In October 2011, we entered into a research license agreement with Selexis SA, or Selexis, pursuant towhich we acquired a non-exclusive license to conduct research internally or in collaboration with thirdparties to develop recombinant proteins from mammalian cells created lines using the Selexis expressiontechnology, or the Selexis Technology. The original research license had a three-year term, but onOctober 9, 2014, was extended for an additional three-year term through October 9, 2017, and thenextended for one more year through October 9, 2018. We may sublicense our rights with Selexis’ priorwritten consent but are

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prohibited from making commercial use of the Selexis Technology or the resultant recombinant proteinscomprising our biosimilars in humans, or from filing an investigational new drug, absent a commerciallicense agreement with Selexis covering the particular biosimilar product candidate developed under theresearch license. In connection with the entry into the research license, we paid Selexis an initial fee andagreed to make additional annual maintenance payments of the same amount for each of the three yearsthat the research license agreement term was extended.

Selexis also granted us a non-transferrable option to obtain a perpetual, non-exclusive, worldwidecommercial license under the Selexis Technology to manufacture, or have manufactured, a recombinantprotein produced by a cell line developed using the Selexis Technology for clinical testing andcommercial sale. We exercised this option in April 2013 and entered into three commercial licenseagreements with Selexis for our ONS-3010, ONS-1045 and ONS-1050 biosimilar candidates. We paid anupfront licensing fee to Selexis for each commercial license and also agreed to pay a fixed milestonepayment for each licensed product. In addition, we are required to pay a single-digit royalty on a finalproduct-by-final product and country-by-country basis, based on worldwide net sales of such finalproducts by us or any of our affiliates or sub-licensees during the royalty term. At any time during theterm, we have the right to terminate our royalty payment obligation by providing written notice to Selexisand paying Selexis a royalty termination fee.

IPCA Laboratories Limited — Humira (ONS-3010), Avastin (ONS-1045) and Herceptin (ONS-1050)

In August 2013, we entered into a strategic license agreement with IPCA Laboratories Limited, or IPCA,under which we granted IPCA and its affiliates a license for the research, development, manufacture, useor sale of ONS-3010 and, by amendment in May 2014, ONS-1045. The license is exclusive with respectto India, Sri Lanka and Myanmar, and non-exclusive with respect to Nepal and Bhutan. Under the terms ofthe August 2013 agreement, we received an upfront payment from IPCA, and are eligible to earnadditional regulatory milestone payments for each of ONS-3010 and ONS-1045. In addition, we areeligible to receive royalties at a low teens percentage rate of annual net sales of products by IPCA and itsaffiliates in the agreed territory.

In January 2014, we entered into an agreement with IPCA to assist IPCA in establishing its research,development and manufacturing capabilities for mAbs and biologics, including, in part, throughcollaborative development, manufacture and commercialization of ONS-1050 (our Herceptin biosimilar),in the agreed territory (as specified below). The agreed territory for ONS-1050 includes the Republics ofIndia, Sri Lanka, Myanmar, Nepal and Bhutan, while the agreed territory for any product candidatesdeveloped independent of our involvement is global without geographical restriction. We also agreed toassist IPCA with its research and development program. Under the terms of the January 2014 agreement,we are eligible to receive development payments and commercialization fees. In addition, we are eligibleto receive royalties from IPCA at a mid-single digit rate on annual net sales of ONS-1050 commercializedby IPCA and its affiliates in the agreed territory.

As of September 30, 2017, we have received an aggregate of  $5.0 million of payments from IPCA underour various agreements.

Liomont — Humira (ONS-3010) and Avastin (ONS-1045)

In June 2014, we entered into a strategic license agreement with Laboratories Liomont, S.A. de C.V., orLiomont, under which we granted Liomont and its affiliates an exclusive, sublicenseable license in Mexicofor the research, development, manufacture, use or sale of the ONS-3010 and ONS-1045 biosimilarproduct candidates in Mexico. Under the terms of the agreement, we received an upfront payment fromLiomont, and we are eligible to earn milestone payments for each of ONS-3010 and ONS-1045. Inaddition, we are eligible to receive tiered royalties at upper single-digit to low teens percentage rates ofannual net sales of products by Liomont and its affiliates in Mexico. As of September 30, 2017, we havereceived an aggregate of  $3.0 million of upfront and milestone payments from Liomont.

Huahai — Humira (ONS-3010) and Avastin (ONS-1045)

In May 2013, we entered into a series of agreements with Zhejiang Huahai Pharmaceutical Co., Ltd., orHuahai, to form an alliance for the purpose of developing and obtaining regulatory approval for, and

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commercial launch and marketing of licensed products in an agreed territory, as described below. Theagreements include a strategic alliance agreement, which sets out the governance framework for therelationship, along with a joint participation agreement regarding joint development and commercializationof ONS-3010, and a co-development and license agreement for each of ONS-3010 and ONS-1045. As ofSeptember 30, 2016, we have received an aggregate of  $16.0 million of upfront and milestone paymentsfrom Huahai.

As contemplated by the strategic alliance agreement, we entered into a joint participation agreement withHuahai where we agreed to co-fund the development and share the value ownership interest of ONS-3010 in the United States, Canada, European Union, Japan, Australia and New Zealand. Under theagreement as amended, we are responsible for completing a defined “Phase-3 Ready Package” at ourexpense, for which the portion of the funds received from Huahai to date under this joint participationagreement was used.

In the event Huahai funds its proportionate share of development costs incurred after completion of the“Phase-3 Ready Packages,” Huahai would be entitled to retain its 51% value ownership, with us entitledto retain our 49% value ownership, of ONS-3010 in the agreed territories. Similarly, revenues fromcommercialization of ONS-3010 in the agreed countries (including major markets such as the UnitedStates and the European Union, or EU, among others), would also be shared based on such proportionalownership interests. In the event that Huahai does not fund its proportionate share of such developmentcosts, the joint participation agreement provides for a proportionate adjustment to our respective valueownership interests based on our respective investments in such development costs, which wouldincrease our value ownership interest in ONS-3010. Under the joint participation agreement, we couldalso be required to form a joint venture to further develop and commercialize ONS-3010 with Huahai inthe agreed countries, if so requested by Huahai.

In conjunction with the strategic alliance agreement, we also entered into a co-development and licenseagreement with Huahai, under which we granted Huahai and its affiliates an exclusive license, in theterritory (as specified below) for the research, development, manufacture, use or sale of ONS-3010 orONS-1045 in China, including, the People’s Republic of China, Hong Kong, Macau and Taiwan. We willeach bear our respective costs under the development plans. Huahai agreed to carry out all clinical,manufacturing and regulatory requirements necessary for approval of the products in the agreed territory.Under the terms of the agreement, we received an upfront payment from Huahai for ONS-3010, and havereceived regulatory milestone payments for each of ONS-3010 and ONS-1045.

GMS Tenshi — Humira (ONS-3010) and Avastin (ONS-1045)

On September 7, 2017, in connection with the entry into the GMS Tenshi purchase agreement for theSeries A Convertible and warrants, we also entered into a joint development and license agreementproviding for the license of rights to ONS-3010 and ONS-1045 in emerging markets, excluding China,India and Mexico, which superseded and replaced a previous strategic licensing agreement dated July 25,2017. As of September 30, 2017, we have received an aggregate of  $5.0 million of payments from GMSTenshi under our joint development and license agreement.

Components of Our Results of Operations

Collaboration Revenue

To date, we have derived revenue only from activities pursuant to our collaboration and licensingagreements. We have not generated any revenue from commercial product sales. For the foreseeablefuture, we expect all of our revenue, if any, will be generated from our collaboration and licensingagreements and, when ready, fees for contract development and manufacturing services we provide. Ifany of our biosimilar product candidates currently under development are approved for commercial sale,we may generate revenue from product sales, or alternatively, we may choose to select a collaborator tocommercialize our product candidates.

The following table sets forth a summary of revenue recognized from our collaboration and licensingagreements for the years ended September 30, 2017 and 2016:

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• expenses incurred under agreements with contract research organizations, or CROs, as well asinvestigative sites and consultants that conduct our preclinical studies and clinical trials;

• manufacturing scale-up expenses and the cost of acquiring and manufacturing preclinical andclinical trial materials and commercial materials, including manufacturing validation batches;

• outsourced professional scientific development services;

• employee-related expenses, which include salaries, benefits and stock-based compensation;

• payments made under a third-party assignment agreement, under which we acquired intellectualproperty;

• expenses relating to regulatory activities, including filing fees paid to regulatory agencies;

• laboratory materials and supplies used to support our research activities; and

• allocated expenses, utilities and other facility-related costs.

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Year ended September 30,

2017 2016 IPCA Collaboration $ 261,072 $ 421,732Liomont Collaboration 236,641 1,382,264Huahai Collaboration 714,848 1,175,580GMS Tenshi Collaboration 2,598,958 —

$3,811,519 $2,979,576

The following table summarizes the milestone payments and recognition of deferred revenues from ourcollaboration and licensing agreements during the years ended September 30, 2017 and 2016:

Year ended September 30,

2017 2016 Milestone payments $2,500,000 $1,000,000Recognition of deferred revenues 1,311,519 1,979,576

$3,811,519 $2,979,576

Each of our collaboration and licensing agreements is considered to be a multiple-element arrangementfor accounting purposes. We determined that there are two deliverables; specifically, the license to ourbiosimilar product candidate and the related research and development services that we are obligated toprovide. We concluded that these deliverables should be accounted for as a single unit of accounting. Wedetermined that the upfront license payments received should be deferred and recognized as revenue ona straight-line basis through the estimated period of completion of our obligations under the agreement.We recognize revenues from the achievement of milestones if the milestone event is substantive andachievability of the milestone was not reasonably assured at the inception of the agreement. During thethree months ended December 31, 2016, we revised our estimate of the period of completion fromDecember 2019 to December 2021.

Research and Development Expenses

Research and development expense consists of expenses incurred in connection with the discovery anddevelopment of our biosimilar product candidates. We expense research and development costs asincurred. These expenses include:

The successful development of our biosimilar product candidates is highly uncertain. At this time, wecannot reasonably estimate or know the nature, timing and costs of the efforts that will be necessary tocomplete the remainder of the development of, or when, if ever, material net cash inflows may commencefrom any of our other biosimilar product candidates. This uncertainty is due to the numerous risks anduncertainties associated with the duration and cost of clinical trials, which vary significantly over the life ofa project as a result of many factors, including:

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• the number of clinical sites included in the trials;

• the length of time required to enroll suitable patients;

• the number of patients that ultimately participate in the trials;

• the number of doses patients receive;

• the duration of patient follow-up;

• the results of our clinical trials;

• the establishment of commercial manufacturing capabilities;

• the receipt of marketing approvals; and

• the commercialization of product candidates.

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Our expenditures are subject to additional uncertainties, including the terms and timing of regulatoryapprovals. We may never succeed in achieving regulatory approval for any of our biosimilar productcandidates. We may obtain unexpected results from our clinical trials. We may elect to discontinue, delayor modify clinical trials of some biosimilar product candidates or focus on others. A change in the outcomeof any of these variables with respect to the development of a biosimilar product candidate could mean asignificant change in the costs and timing associated with the development of that biosimilar productcandidate. For example, if the U.S. Food and Drug Administration, or FDA, or other regulatory authoritieswere to require us to conduct clinical trials beyond those that we currently anticipate, or if we experiencesignificant delays in enrollment in any of our clinical trials, we could be required to expend significantadditional financial resources and time on the completion of clinical development. Biosimilar productcommercialization will take several years and millions of dollars in development costs.

Research and development activities are central to our business model. Biosimilar product candidates inlater stages of clinical development generally have higher development costs than those in earlier stagesof clinical development, primarily due to the increased size and duration of later-stage clinical trials. Weexpect our research and development expenses to increase significantly over the next several years aswe increase personnel costs, including stock-based compensation, conduct clinical trials and prepareregulatory filings for our biosimilar product candidates.

General and Administrative Expenses

General and administrative expenses consist principally of salaries and related costs for personnel inexecutive, administrative, finance and legal functions, including stock-based compensation, travelexpenses and recruiting expenses. Other general and administrative expenses include facility relatedcosts, patent filing and prosecution costs and professional fees for business development, legal, auditingand tax services and insurance costs.

We anticipate that our general and administrative expenses will increase as a result of increased payroll,expanded infrastructure and an increase in accounting, consulting, legal and tax-related servicesassociated with maintaining compliance with stock exchange listing and SEC requirements, investorrelations costs, and director and officer insurance premiums associated with being a public company. Wealso anticipate that our general and administrative expenses will increase in support of our clinical trials aswe expand and progress our development programs. Additionally, if and when we believe a regulatoryapproval of a biosimilar product candidate appears likely, we anticipate an increase in payroll andexpense as a result of our preparation for commercial operations, particularly as it relates to the sales andmarketing of our biosimilar product.

Interest Expense

Interest expense consists of cash paid and non-cash interest expense related to our senior secured notes,former bank loans, notes with current and former stockholders, equipment loans, capital lease and otherfinance obligations.

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Income Taxes

During the years ended September 30, 2017 and 2016, we incurred $0.5 million and $0.1 million,respectively, of foreign withholding taxes in connection with our collaboration and licensing agreements.

Since inception, we have not recorded any U.S. federal or state income tax benefits (excluding the sale ofNew Jersey state NOLs and research credits) for the net losses we have incurred in each year or on ourearned research and development tax credits, due to our uncertainty of realizing a benefit from thoseitems. As of September 30, 2017, we had federal and state NOL carryforwards of  $131.5 million and$69.6 million, respectively that will begin to expire in 2030 and 2036, respectively. As of September 30,2017, we had federal foreign tax credit carryforwards of  $2.9 million available to reduce future taxliabilities, which begin to expire starting in 2023. As of September 30, 2017, we also had federal researchand development tax credit carryforwards of  $0.8 million which begin to expire in 2031.

In general, under Section 382 of the Internal Revenue Code of 1986, as amended, or the Code, acorporation that undergoes an “ownership change” is subject to limitations on its ability to utilize its NOLsto offset future taxable income. We have not completed a study to assess whether an ownership changehas occurred in the past. Our existing NOLs may be subject to limitations arising from previous ownershipchanges, and if we undergo an ownership change in connection with or after our IPO, our ability to utilizeNOLs could be further limited by Section 382 of the Code. Future changes in our stock ownership, someof which are outside of our control, could result in an ownership change under Section 382 of the Code.Our NOLs are also subject to international regulations, which could restrict our ability to utilize our NOLs.Furthermore, our ability to utilize NOLs of companies that we may acquire in the future may be subject tolimitations. There is also a risk that due to regulatory changes, such as suspensions on the use of NOLs,or other unforeseen reasons, our existing NOLs could expire or otherwise be unavailable to offset futureincome tax liabilities.

Results of Operations

Comparison of Years Ended September 30, 2017 and 2016Year ended September 30,

2017 2016 Change Collaboration revenues $ 3,811,519 $ 2,979,576 $ 831,943Operating expenses:

Research and development 23,809,749 32,763,178 (8,953,429General and administrative 15,882,033 21,563,573 (5,681,540

39,691,782 54,326,751 (14,634,969Loss from operations (35,880,263 (51,347,175 15,466,912Interest expense 5,625,833 1,851,814 3,774,019Change in fair value of warrant liability (3,158,469 — (3,158,469Loss before income taxes (38,347,627 (53,198,989 14,851,362Income tax expense 501,500 103,000 398,500Net loss $(38,849,127 $(53,301,989 $ 14,452,862

Collaboration Revenues

Collaboration revenues increased $0.8 million for the year ended September 30, 2017 compared to theyear ended September 30, 2016 due to a $1.5 million increase in milestone payments offset by a$0.7 million reduction in the amortization of deferred revenue as compared to the prior year. The increasein milestone payments in 2017 is primarily due to payments received under our joint development andlicensing agreement with GMS Tenshi.

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Research and Development Expenses

The following table summarizes our research and development expenses by functional area for the yearsended September 30, 2017 and 2016:

Year ended September 30,2017 2016

Preclinical and clinical development $ 9,674,633 $14,820,730Compensation and related benefits 7,460,814 9,214,216Stock-based compensation 1,001,022 2,044,379Other research and development 5,673,280 6,683,853

Total research and development expenses $23,809,749 $32,763,178

The following table summarizes our research and development expenses by compound for the yearsended September 30, 2017 and 2016:

Year ended September 30,2017 2016

ONS-3010 $ 5,195,278 $ 9,401,458ONS-1045 2,931,414 4,633,316Early-stage compounds 1,547,941 785,956Personnel related and stock-based compensation 8,461,836 11,258,595Other research and development 5,673,280 6,683,853

Total research and development expenses $23,809,749 $32,763,178

Research and development expenses for the year ended September 30, 2017 decreased by $9.0 millioncompared to the year ended September 30, 2016, primarily due to a $5.1 million decrease in preclinicaland clinical development costs as we postponed the initiation of our planned Phase 3 clinical trials forONS-3010 and ONS-1045 until we secure additional development partners, as well as a decrease of $2.8million in compensation costs consisting of $1.8 million in lower other compensation and related benefitsin 2017 as we experienced some attrition due to the postponement of our Phase 3 clinical plans and adecrease of  $1.0 million from lower stock-based compensation costs as a result of meeting theexercisability condition of our performance based stock unit awards, or PSUs, with our IPO in the priorperiod, and a $1.0 million decrease in other research and development expenses related to our ongoingcost reduction efforts.

General and Administrative Expenses

The following table summarizes our general and administrative expenses by type for the years endedSeptember 30, 2017 and 2016:

Year ended September 30,2017 2016

Professional fees $ 3,263,523 $ 4,549,315Compensation and related benefits 2,695,751 4,131,014Stock-based compensation 7,570,408 10,405,700Facilities, fees and other related costs 2,352,351 2,477,544

Total general and administration expenses $15,882,033 $21,563,573

General and administrative expenses decreased $5.7 million for the year ended September 30, 2017,compared to the year ended September 30, 2016, primarily due to a decrease in stock-basedcompensation of  $2.8 million, which was higher in 2016 due to the recognition of significant stock-basedcompensation expense related to the completion of our IPO and satisfaction of the related PSU liability, a$1.4 million decrease in other compensation and related benefits due to an IPO related performancebonus in the prior period, and a $1.3 million reduction in professional fees related to our ongoing costreduction efforts.

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Interest Expense

Interest expense increased by $3.8 million to $5.6 million for the year ended September 30, 2017 ascompared to $1.9 million for the year ended September 30, 2016 primarily due to the amortization of debtdiscount and interest expense on the senior secured notes issued December 2016 through May 2017.

Change in Fair Value of Warrant Liability

During the year ended September 30, 2017, we recorded income of  $3.2 million related to the decreasein the fair value of our common stock warrant liability as a result of the decrease in the price of ourcommon stock during the period. There was no warrant liability or related charges during the year endedSeptember 30, 2016.

Liquidity and Capital Resources

We have not generated any revenue from biosimilar product sales. Since inception, we have incurred netlosses and negative cash flows from our operations. Through September 30, 2017, we have fundedsubstantially all of our operations through the sale and issuance of  $159.7 million net proceeds of ourequity securities, debt securities and borrowings under debt facilities. We have also received anaggregate of $29.0 million pursuant to our collaboration and licensing agreements. Between October 2016and December 2016, we issued $1.85 million of unsecured promissory notes, which notes wereexchanged for new senior secured promissory notes and warrants to acquire an 425,000 shares of ourcommon stock in December 2016 concurrent with the issuance of  $6.5 million aggregate principalamount of new senior secured promissory notes and warrants to acquire an aggregate 1,495,000 sharesof our common stock for cash. Between December 2016 and May 2017 we issued an additional$13.15 million of senior secured promissory notes and warrants for cash. In September 2017, we closedon the initial sale of 32,628 shares of Series A Convertible to GMS Tenshi for $3.3 million of cash, andentered into an investor rights agreement and joint development and licensing agreement. On October 31,2017, following receipt of stockholder approval, we issued an additional 217,372 shares of our Series AConvertible and warrants to acquire an aggregate of 16,750,000 shares of our common stock to GMSTenshi for $21.7 million of cash. We also converted $1.5 million aggregate principal amount of our seniorsecured notes into 1,500,000 shares of our Series B Convertible. We will require additional capital to fundour operations past June 2018. Alternatively, we will be required to scale back our plans and place certainactivities on hold.

As of September 30, 2017, we had an accumulated deficit of  $186.2 million and a cash balance of$3.2 million. In addition, we have $13.5 million of senior secured notes due in December 2018 and$4.6 million of indebtedness that is due on demand. These matters raise substantial doubt about ourability to continue as a going concern. Our consolidated financial statements do not include anyadjustments related to the recoverability and classification of recorded asset amounts or the amounts andclassification of liabilities that might result from the outcome of this uncertainty. We anticipate incurringadditional losses until such time, if ever, that we can generate significant sales of our product candidatescurrently in development or from receiving fees for contract development and manufacturing services thatwe plan to provide for other biopharmaceutical companies. We will need substantial additional financing tofund our operations and to commercially develop our product candidates. Management is currentlyevaluating various strategic opportunities to obtain the required funding for future operations. Thesestrategies may include, but are not limited to: providing contract development and manufacturing serviceson a fee for service basis, private placements of equity and/or debt, payments from potential strategicresearch and development, licensing and/or marketing arrangements with pharmaceutical companies,and public offerings of equity and/or debt securities. Additionally, we continue to engage in activediscussions with global and regional pharmaceutical companies for licensing and/or co-developmentrights to our late- and early-stage pipeline candidates. There can be no assurance that these futurefunding efforts will be successful.

In November 2017, we received approval from the New Jersey Economic Development Authority’sTechnology Business Tax Certificate Transfer Program to sell a portion of our unused New Jersey netoperating losses, or NOLs, and research and development tax credits. As a result, we received $3.15million of cash from the sale of these NOLs and credits in December 2017.

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Our future operations are highly dependent on a combination of factors, including (i) the timely andsuccessful completion of additional financing discussed above, (ii) our ability to complete revenue-generating partnerships with pharmaceutical companies, (iii) the success of our research anddevelopment, (iv) the development of competitive therapies by other biotechnology and pharmaceuticalcompanies, and, ultimately, (v) regulatory approval and market acceptance of our proposed futureproducts.

Cash Flows

The following table summarizes our cash flows for each of the years presented:

Year ended September 30,2017 2016

Net cash used in operating activities $(15,505,054 $(45,482,672Net cash used in investing activities (292,086 (1,098,180Net cash provided by financing activities 16,630,772 39,861,764Net increase (decrease) in cash $ 833,632 $ (6,719,088

Operating Activities

During the year ended September 30, 2017, we used $15.5 million of cash in operating activities,primarily resulting from our net loss of  $38.8 million. This use of cash was partially offset by the net cashprovided from changes in our operating assets and liabilities of  $11.1 million and $12.2 million of noncashitems such as non-cash interest expense, stock-based compensation, change in fair value of warrantliability and depreciation and amortization expense. The change in our operating assets and liabilities wasprimarily due to an increase in accounts payable and a decrease in prepaid expenses related to the timingof vendor payments for research and development, as well as an increase in deferred revenue due to theupfront payment received from GMS Tenshi under the joint development and licensing agreement. Theseinflows were partially offset by a decrease in accrued expenses.

During the year ended September 30, 2016, we used $45.5 million of cash in operating activities,primarily resulting from our net loss of  $53.3 million and the net cash used from changes in our operatingassets and liabilities of  $7.1 million. These uses of cash in our operating activities were offset by$14.9 million of noncash items such as stock-based compensation and depreciation and amortizationexpense. The change in our operating assets and liabilities was primarily due to decreases in accountspayable related to the timing of vendor payments for research and development and professional servicesin connection with preparations for our IPO in May 2016 and decreases in deferred revenues due toratable recognition of upfront payments received under our collaboration arrangements. These outflowswere offset by increases in our prepaid expenses and other current assets, and increases in accruedexpenses, and other liabilities that relate to the timing of vendor payments and the recognition of researchand development expenses.

Investing Activities

During the years ended September 30, 2017 and 2016, we used cash of  $0.3 million and $1.1 million,respectively, in investing activities for the purchase of property and equipment.

Financing Activities

During the year ended September 30, 2017, net cash provided by financing activities was $16.6 million,primarily attributable to $15.0 million in proceeds from the sale and issuance of our senior secured notesand warrants, $3.3 million from the sale and issuance of our Series A Convertible and $1.9 million fromthe sale and issuance of common stock and exercise of warrants, net of offering costs. These inflowswere offset by $3.7 million in debt payments, $2.4 million of which was used to repay senior bank loans inDecember 2016.

During the year ended September 30, 2016, net cash provided by financing activities was $39.9 million,primarily attributable to $33.8 in aggregate net proceeds from our IPO and concurrent private placementin May 2016, $14.8 million in net proceeds from the sale of our common stock and $4.3 million inproceeds

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from the collection of subscriptions receivable. We also received $0.8 million from SonnetBiotherapeutics, Inc. in connection with their note receivable. These inflows were offset by $13.5 million indebt payments and $0.4 million upon the deconsolidation of Sonnet Biotherapeutics, Inc.

Funding Requirements

We plan to focus in the near term on expanding the capacity and capabilities of our BioSymphonyPlatform to accelerate and maximize commercial revenues from our core expertise in drug developmentand manufacturing. With the completion of this expansion, we expect to begin generating commercialrevenue in 2019 to cover the basic operating costs of running our business which will allow us to use anyfunds generated from our partnerships or other transactions for investment directly in our developmentpipeline. Additionally, we will continue to focus on the development, regulatory approval and potentialcommercialization of our biosimilar product candidates, with an emphasis on generating commercial salesin emerging markets, until we secure additional partnerships for the development of our pipeline in thedeveloped markets. We anticipate we will incur net losses and negative cash flow from operationsthrough 2018 as we complete preparations to provide contract development and manufacturing serviceson a fee for service basis beginning in 2019. In addition, we plan to continue to invest in discovery effortsto explore additional biosimilar product candidates, explore innovative drug development opportunities,expand our corporate infrastructure and, if successful in securing additional partnerships, moving ourbiosimilar product candidates into and through clinical trials. We may not be able to complete thedevelopment and initiate commercialization of these programs if, among other things, we are unable tosuccessfully launch our contract development and manufacturing services business, our clinical trials arenot successful or if the FDA does not approve our biosimilar products arising out of our current clinicaltrials when we expect, or at all.

Our primary uses of capital are, and we expect will continue to be, compensation and related expenses,manufacturing facility costs, external research and development services, laboratory and related supplies,legal and other regulatory expenses, and administrative and overhead costs. Our future fundingrequirements will be heavily determined by the resources needed to support development of ourbiosimilar product candidates.

As a publicly traded company we are incurring significant legal, accounting and other expenses that wewere not required to incur as a private company. In addition, the Sarbanes-Oxley Act of 2002 as well asrules adopted by the SEC and The NASDAQ Stock Market LLC, requires public companies to implementspecified corporate governance practices that did not apply to us as a private company. These rules andregulations have increased our legal and financial compliance costs and make some activities more time-consuming and costly.

We believe our existing cash as of September 30, 2017 together with the $21.7 million of proceeds fromthe sale and issuance of our Series A Convertible and warrants to GMS Tenshi in October 2017 willprovide adequate financial resources to fund our planned operations through June 2018. We have basedthis estimate on assumptions that may prove to be wrong, and we could utilize our available capitalresources sooner than we expect. We will need to raise substantial additional capital in order tocommence any Phase 3 clinical trials of, receive approval for and commercialize ONS-3010 and ONS-1045 and commence clinical trials for any of our other pipeline candidates. We plan to finance our futureoperations with a combination of proceeds from providing contract development and manufacturingservices for a fee, the issuance of equity securities, the issuance of additional debt, potential strategiccollaborations and revenues from potential future product sales, if any. If we raise additional capitalthrough the sale of equity or convertible debt securities, your ownership will be diluted, and the terms ofthese securities may include liquidation or other preferences that adversely affect your rights as a holderof our common stock. There are no assurances that we will be successful in obtaining an adequate levelof financing for the development and commercialization of ONS-3010, ONS-1045 or any other current orfuture biosimilar product candidates. If we are unable to secure adequate additional funding, our business,operating results, financial condition and cash flows may be materially and adversely affected.

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• the number and characteristics of the biosimilar product candidates we pursue;

• the scope, progress, results and costs of researching and developing our biosimilar productcandidates, and conducting preclinical studies and clinical trials;

• the timing of, and the costs involved in, obtaining regulatory approvals for our biosimilar productcandidates;

• the cost of manufacturing our biosimilar product candidates and any drugs we successfullycommercialize;

• our ability to establish and maintain strategic collaborations, licensing or other arrangements andthe financial terms of such agreements;

• the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patentclaims, including litigation costs and the outcome of such litigation; and

• the timing, receipt and amount of sales of, or milestone payments related to or royalties on, ourcurrent or future biosimilar product candidates, if any.

(1) Operating lease and financing arrangement obligations reflect our obligation to make payments in connection with theleases for our office, manufacturing and laboratory facilities located in Cranbury, New Jersey. See Note 9 to ourconsolidated financial statements.

(2) Debt obligations reflect outstanding principal obligations due to investors on senior secured debt, notes payable andinstitutions and equipment loans. Subsequent to September 30, 2017, $1.5 million of the senior secured notesconverted to Series B Convertible.

(3) Capital lease obligations reflect our outstanding principal payment obligations in connection with leased equipmentused in our manufacturing facility.

(4) This table does not include (a) any milestone payments that may become payable to third parties under licenseagreements as the timing and likelihood of such payments are not known with certainty, (b) any royalty payments tothird parties as the amounts, timing and likelihood of such payments are not known, and (c) contracts that are enteredinto in the ordinary course of business that are not material in the aggregate in any period presented above.

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Because of the numerous risks and uncertainties associated with research, development andcommercialization of biosimilar products, we are unable to estimate the exact amount of our workingcapital requirements. Our future funding requirements will depend on many factors, including:

See “Risk Factors” for additional risks associated with our substantial capital requirements.

Contractual Obligations and Commitments

Our future contractual obligations as of September 30, 2017 were as follows:

Payments Due by Period

Total Less Than 1

Year 1 – 3 Years

3 – 5 Years

More Than 5 Years

Operating lease and financingarrangement commitments $10,471,109 $1,717,864 $ 5,159,075 $2,458,060 $1,136,110

Debt obligations 19,816,210 4,689,077 15,127,133 — —Capital leases 397,652 367,782 29,870 — —

Total $30,684,971 $6,774,723 $20,316,078 $2,458,060 $1,136,110

Under our license agreement with Selexis, we are obligated to pay milestone payments, as well as aroyalty at a single-digit percentage of net sales of any covered product we successfully commercialize.

We also have employment agreements with certain employees, which require the funding of a specificlevel of payments if certain events, such as a change in control or termination without cause, occur.

In addition, in the course of normal business operations, we have agreements with contract serviceproviders to assist in the performance of our research and development and manufacturing activities.Expenditures to CROs represent a significant cost in clinical development. We can elect to discontinuethe

(1)

(2)

(3)

(4)

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• the delivered item has value to the customer on a stand-alone basis; and

• if the arrangement includes a general right of return relative to the delivered item, delivery orperformance of the undelivered item is considered probable and substantially in our control.

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work under these agreements at any time. We could also enter into additional collaborative research andlicensing, contract research, manufacturing, and supplier agreements in the future, which may requireupfront payments and even long-term commitments of cash.

Off-Balance Sheet Arrangements

We did not have during the periods presented, and we do not currently have, any off-balance sheetarrangements, as defined in the rules and regulations of the SEC.

Critical Accounting Policies and Significant Judgments and Estimates

Our consolidated financial statements are prepared in accordance with U.S. generally acceptedaccounting principles. The preparation of our consolidated financial statements and related disclosuresrequires us to make estimates and judgments that affect the reported amounts of assets and liabilities,disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and thereported amounts of revenues and expenses during the reported period. We base our estimates onhistorical experience, known trends and events and various other factors that we believe to be reasonableunder the circumstances, the results of which form the basis for making judgments about the carryingvalues of assets and liabilities that are not readily apparent from other sources. We evaluate ourestimates and assumptions on an ongoing basis. Our actual results may differ from these estimates underdifferent assumptions and conditions.

While our significant accounting policies are described in more detail in the notes to our auditedconsolidated financial statements appearing elsewhere in this Annual Report on Form 10-K we believethat the following accounting policies are those most critical to the judgments and estimates used in thepreparation of our consolidated financial statements.

Revenue Recognition

We generate revenue primarily through collaboration and licensing agreements that contain multipledeliverables, generally a license and research and development services. Revenue recognition forarrangements with multiple elements requires the determination of whether an arrangement involvingmultiple deliverables contains more than one unit of accounting. A delivered item within an arrangement isconsidered a separate unit of accounting only if both of the following criteria are met:

If both of the criteria above are not met, then separate accounting for the individual deliverables is notappropriate. Revenue recognition for arrangements with multiple deliverables constituting a single unit ofaccounting is recognized generally over the greater of the term of the arrangement or the expected periodof performance, either on a straight-line basis or on a modified proportional performance method. Werecord amounts received prior to satisfying the revenue recognition criteria as deferred revenue on ourbalance sheet. We classify amounts expected to be recognized as revenue in the next twelve monthsfollowing the balance sheet date as current liabilities. We recognize revenues from the achievement ofmilestones if the milestone event is substantive and achievability of the milestone was not reasonablyassured at the inception of the agreement. During the three months ended December 31, 2016, werevised our estimate of the period of completion from December 2019 to December 2021.

Accrued Research and Development Expenses

As part of the process of preparing our consolidated financial statements, we are required to estimate ouraccrued research and development expenses. This process involves reviewing open contracts andpurchase orders, communicating with our applicable personnel to identify services that have beenperformed on our behalf and estimating the level of service performed and the associated cost incurredfor the service when we have not yet been invoiced or otherwise notified of actual costs. The majority ofour service providers require advance payments; however, some invoice us in arrears for servicesperformed, on a pre-determined

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• vendors in connection with preclinical development activities;

• the production of preclinical and clinical trial materials;

• CROs in connection with clinical trials; and

• investigative sites in connection with clinical trials.

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schedule or when contractual milestones are met. We make estimates of our accrued expenses as ofeach balance sheet date in the consolidated financial statements based on facts and circumstancesknown to us at that time. We periodically confirm the accuracy of the estimates with the service providersand makes adjustments if necessary. Examples of estimated accrued research and developmentexpenses include fees paid to:

We base our expenses related to preclinical studies and clinical trials on our estimates of the servicesreceived and efforts expended pursuant to quotes and contracts with multiple research institutions andCROs that conduct and manage preclinical studies and clinical trials on our behalf. The financial terms ofthese agreements are subject to negotiation, vary from contract to contract and may result in unevenpayment flows. There may be instances in which payments made to our vendors will exceed the level ofservices provided and result in a prepayment of the expense. Payments under some of these contractsdepend on factors such as the successful enrollment of patients and the completion of clinical trialmilestones. In accruing service fees, we estimate the time period over which services will be performedand the level of effort to be expended in each period. If the actual timing of the performance of services orthe level of effort varies from the estimate, we adjust the accrual or prepaid accordingly. Although we donot expect our estimates to be materially different from amounts actually incurred, our understanding ofthe status and timing of services performed relative to the actual status and timing of services performedmay vary and may result in reporting amounts that are too high or too low in any particular period. Todate, we have not made any material adjustments to our prior estimates of accrued research anddevelopment expenses.

JOBS Act Accounting Election

The JOBS Act permits an “emerging growth company” such as our company to take advantage of anextended transition period to comply with new or revised accounting standards applicable to publiccompanies until those standards would otherwise apply to private companies. We have irrevocablyelected to “opt out” of this provision and, as a result, we will comply with new or revised accountingstandards when they are required to be adopted by public companies that are not emerging growthcompanies.

Recently Issued and Adopted Accounting Pronouncements

In May 2017, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update,or ASU, No. 2017-09, Compensation —  Stock Compensation (Topic 718): Scope of ModificationAccounting. This new ASU is intended provide clarity and reduce both the diversity in practice of and costand complexity of applying the guidance in Topic 718, Compensation — Stock Compensation, to achange to the terms or conditions of a share-based payment award. This ASU provides guidance aboutwhich changes to the terms or conditions of a share-based payment award require an entity to applymodification accounting in Topic 718. This ASU is effective for all entities for annual periods, and interimperiods within those annual periods, beginning after December 15, 2017. Early adoption is permitted. ThisASU is not expected to have a material impact on our consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, Leases, (Topic 842). This new ASU represents awholesale change to lease accounting and introduces a lease model that brings most leases on thebalance sheet. It also eliminates the required use of bright-line tests in current U.S. GAAP for determininglease classification. This ASU is effective for annual periods beginning after December 15, 2018 (i.e.,calendar periods beginning on January 1, 2019), and interim periods thereafter. Earlier application ispermitted for all entities. We are currently evaluating the impact of ASU 2016-02 on our consolidatedfinancial statements.

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• Contracts with customers  —  including revenue and impairments recognized, disaggregation ofrevenue and information about contract balances and performance obligations (including thetransaction price allocated to the remaining performance obligations).

• Significant judgments and changes in judgments  —  determining the timing of satisfaction ofperformance obligations (over time or at a point in time), and determining the transaction priceand amounts allocated to performance obligations.

• Certain assets  — assets recognized from the costs to obtain or fulfill a contract.

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In August 2014, the FASB issued ASU No. 2014-15, Disclosure of Uncertainties about an Entity’s Abilityto Continue as a Going Concern. The amendments in this update explicitly require a company’smanagement to assess an entity’s ability to continue as a going concern, and to provide related footnotedisclosures in certain circumstances. We adopted this new standard effective in the quarter endedDecember 31, 2016.

In May 2014, the FASB issued ASU, No. 2014-09, Revenue from Contracts with Customers . Thisguidance requires an entity to recognize revenue to depict the transfer of promised goods or services tocustomers in an amount that reflects the consideration to which the entity expects to be entitled inexchange for those goods or services. This guidance also requires an entity to disclose sufficientinformation to enable users of financial statements to understand the nature, amount, timing anduncertainty of revenue and cash flows arising from contracts with customers. Qualitative and quantitativeinformation is required about:

In July 2015, the FASB delayed the effective date of this guidance. As a result, this guidance will beeffective for annual reporting periods beginning after December 15, 2017, including interim periods withinthat reporting period. Earlier application is permitted only as of annual reporting periods beginning afterDecember 15, 2016, including interim reporting periods within that reporting period. We are currentlyevaluating the impact that this guidance will have on our consolidated results of operations, financialposition and cash flows.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

Not applicable.

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Item 8. Consolidated Financial Statements and Supplementary Data

ONCOBIOLOGICS, INC. ANNUAL REPORT ON FORM 10-K

INDEX TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS

Page

Report of Independent Registered Public Accounting Firm 96Consolidated Balance Sheets 97Consolidated Statements of Operations 98Consolidated Statements of Redeemable and Convertible Preferred Stock, Common Stock,

Noncontrolling Interests and Stockholders’ Equity (Deficit) 99Consolidated Statements of Cash Flows 100Notes to Consolidated Financial Statements 101

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders Oncobiologics, Inc.:

We have audited the accompanying consolidated balance sheets of Oncobiologics, Inc. and subsidiaries(the Company) as of September 30, 2017 and 2016, and the related consolidated statements ofoperations, redeemable and convertible preferred stock, common stock, noncontrolling interests andstockholders’ equity (deficit), and cash flows for the years then ended. These consolidated financialstatements are the responsibility of the Company’s management. Our responsibility is to express anopinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting OversightBoard (United States). Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of material misstatement. An audit includesexamining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.An audit also includes assessing the accounting principles used and significant estimates made bymanagement, as well as evaluating the overall financial statement presentation. We believe that ouraudits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all materialrespects, the financial position of Oncobiologics, Inc. and subsidiaries as of September 30, 2017 and2016, and the results of their operations and their cash flows for the years then ended, in conformity withU.S. generally accepted accounting principles.

The accompanying consolidated financial statements have been prepared assuming the Company willcontinue as a going concern. As discussed in Note 2 to the consolidated financial statements, theCompany has incurred recurring losses and negative cash flows from operations since inception and hasan accumulated deficit at September 30, 2017 of  $186.2 million, $13.5 million of senior secured notes duein December 2018 and $4.6 million of indebtedness that is due on demand, which raises substantial doubtabout its ability to continue as a going concern. Management’s plan in regards to these matters are alsodescribed in Note 2. The consolidated financial statements do not include any adjustments that mightresult from the outcome of this uncertainty.

/s/ KPMG LLP

Philadelphia, Pennsylvania December 29, 2017

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Oncobiologics, Inc.

Consolidated Balance SheetsSeptember 30,

2017 2016 Assets

Current assets:Cash $ 3,185,519 $ 2,351,887Prepaid and other current assets 719,087 3,326,607

Total current assets 3,904,606 5,678,494Property and equipment, net 16,088,902 18,658,553Restricted cash — 216,086Other assets 740,362 852,801

Total assets $ 20,733,870 $ 25,405,934Liabilities, convertible preferred stock and stockholders’ equity (deficit)

Current liabilities:Current portion of long-term debt $ 52,600 $ 586,454Current portion of capital lease obligations 341,120 977,248Stockholder notes 4,612,500 4,612,500Accounts payable 10,954,358 5,071,520Accrued expenses 7,337,469 6,121,942Income taxes payable 2,352,129 1,854,629Deferred revenue 3,087,561 1,212,561

Total current liabilities 28,737,737 20,436,854Senior secured notes 13,231,700 —Long-term debt 151,110 2,233,803Capital lease obligations 28,067 320,737Warrant liability 2,274,954 —Deferred revenue 4,466,865 5,153,384Other liabilities 2,569,971 2,434,061

Total liabilities 51,460,404 30,578,839Commitments (Note 9)Convertible preferred stock:

Series A convertible preferred stock, par value $0.01 per share: 1,000,000 sharesauthorized, 32,628 issued and outstanding at September 30, 2017; no sharesdesignated, issued and outstanding at September 30, 2016 2,924,441 —

Series B convertible preferred stock, par value $0.01 per share: 1,500,000 sharesauthorized, none issued and outstanding at September 30, 2017; no sharesdesignated, issued and outstanding at September 30, 2016 — —Total convertible preferred stock 2,924,441 —

Stockholders’ equity (deficit):Series A preferred stock, par value $0.01 per share: 10,000,000 shares authorized,

no shares issued and outstanding — —Common stock, par value $0.01 per share; 200,000,000 shares authorized;

24,933,944 and 22,802,778 shares issued and outstanding at September 30, 2017 and 2016, respectively 249,339 228,028

Additional paid-in capital 152,315,088 141,965,342Accumulated deficit (186,215,402 (147,366,275

Total stockholders’ equity (deficit) (33,650,975 (5,172,905

Total liabilities, convertible preferred stock and stockholders’ equity (deficit) $ 20,733,870 $ 25,405,934

See accompanying notes to consolidated financial statements.

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Oncobiologics, Inc.

Consolidated Statements of OperationsYear Ended September 30,

2017 2016 Collaboration revenues $ 3,811,519 $ 2,979,576

Operating expenses:Research and development 23,809,749 32,763,178General and administrative 15,882,033 21,563,573

39,691,782 54,326,751

Loss from operations (35,880,263 (51,347,175Interest expense, net 5,625,833 1,851,814Change in fair value of warrant liability (3,158,469 —

Loss before income taxes (38,347,627 (53,198,989Income tax expense 501,500 103,000

Net loss (38,849,127 (53,301,989Recognition of beneficial conversion feature upon issuance of Series A

convertible preferred stock (1,176,743 —Accretion of redeemable preferred stock and noncontrolling interests — (2,463,160Deemed dividend upon issuance of warrants to common stockholders — (7,373,820

Net loss attributable to common stockholders $(40,025,870 $(63,138,969

Per share information:Net loss per share of common stock, basic $ (1.67 $ (3.67

Net loss per share of common stock, diluted $ (1.80 $ (3.67

Weighted average shares outstanding, basic 24,022,371 17,212,983

Weighted average shares outstanding, diluted 24,041,789 17,212,983

See accompanying notes to consolidated financial statements.

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Oncobiologics, Inc.

Consolidated Statements of Redeemable and Convertible Preferred Stock, Common Stock, Noncontrolling Interests and Stockholders’ Equity (Deficit)

Redeemable Preferred Stock, Common Stock and Noncontrolling Interests Stockholders’ Equity (Deficit) Preferred Stock

Additional

Paid-in Capital Accumulated

Deficit Noncontrolling

Interests

Total Stockholders’ Equity (Deficit)

Series A Series B Common Stock Noncontrolling

Interests Series A Convertible

Preferred Stock Common Stock Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount

Balance at October 1, 2015 3,568 $ 5,072,653 4,000 $ 5,118,208 1,739,130 $ 15,426,673 $ 1,703,777 — $ — 9,436,294 $ 39,844,900 $ — $ (94,064,286 $ (654,417 $(54,873,803Deconsolidation of Sonnet Biotherapeutics, Inc. — — — — — — — — — — — — — 654,417 654,417Employee tax withholdings related to the vesting of

restricted stock — — — — — — — — — (2,782 (71,760 — — — (71,760Reincorporation to a Delaware Corporation (3,568 (5,072,653 (4,000 (5,118,208 — — — 10,193 102 2,193,601 (39,656,869 49,847,628 — — 10,190,861Issuance of common stock upon the dissolution of

Parilis — — — — — — (1,703,777 1,626 16 226,663 2,267 1,701,494 — — 1,703,777Sale of common stock, net of issuance costs — — — — — — — — — 573,388 5,734 16,132,179 — — 16,137,913Reclassification of stock-based compensation

liability — — — — — — — — — — — 15,118,584 — — 15,118,584Accretion of redeemable common stock — — — — — 2,463,160 — — — — — (2,463,160 — — (2,463,160Sale of common stock units upon consummation of initial

public offering and concurrent private placement, net of issuance costs — — — — — — — — — 6,666,666 66,667 33,717,538 — — 33,784,205

Reclassification of redeemable common stock uponconsummation of the initial public offering — — — — (1,739,130 (17,889,833 — — — 1,739,130 17,391 17,872,442 — — 17,889,833

Conversion of Series A preferred stock in connection withinitial public offering — — — — — — — (11,819 (118 1,969,818 19,698 (19,580 — — —

Stock-based compensation expense — — — — — — — — — — — 10,058,217 — — 10,058,217Net loss — — — — — — — — — — — — (53,301,989 — (53,301,989

Balance at September 30, 2016 — — — — — — — — — 22,802,778 228,028 141,965,342 (147,366,275 — (5,172,905Proceeds from exercise of common stock warrants — — — — — — — — — 787,018 7,869 305,616 — — 313,485Issuance of vested restricted stock units — — — — — — — — — 483,913 4,840 (4,840 — — —Issuance of common stock in connection with equity facility — — — — — — — — — 122,418 1,224 (1,224 — — —Sale of common stock, net of issuance costs — — — — — — — — — 737,817 7,378 1,495,749 — — 1,503,127Sale of Series A convertible preferred, net of costs 32,628 2,924,441 — — — — — — — — — — — — —Series A convertible preferred stock dividends — — — — — — — — — — — (16,985 — — (16,985Stock-based compensation expense — — — — — — — — — — — 8,571,430 — — 8,571,430Net loss — — — — — — — — — — — — (38,849,127 — (38,849,127

Balance at September 30, 2017 32,628 $ 2,924,441 — $ — — $ — $ — — $ — 24,933,944 $ 249,339 $152,315,088 $(186,215,402 $ — $(33,650,975

See accompanying notes to consolidated financial statements.

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Oncobiologics, Inc.

Consolidated Statements of Cash FlowsYear Ended September 30,

2017 2016 OPERATING ACTIVITIES

Net loss $(38,849,127 $(53,301,989Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortization 2,692,100 2,394,279Non-cash interest expense 4,014,633 13,465Stock-based compensation 8,571,430 12,450,079Change in fair value of warrant liability (3,158,469 —Loss on disposal of fixed assets 61,867 13,647Changes in operating assets and liabilities:

Accounts receivable — 20,000Prepaid expenses and other current assets 2,607,520 (1,533,498Other assets 112,439 57,423Accounts payable 5,727,136 (5,326,374Accrued expenses 893,526 1,154,712Income taxes payable 497,500 100,000Deferred revenue 1,188,481 (1,979,576Other liabilities 135,910 455,160

Net cash used in operating activities (15,505,054 (45,482,672INVESTING ACTIVITIES

Purchase of property and equipment (292,086 (1,098,180Net cash used in investing activities (292,086 (1,098,180

FINANCING ACTIVITIESProceeds from the sale of common stock, net of offering costs 1,607,396 16,137,913Proceeds from sale of common stock units in connection with initial public offering and private

placement — 37,074,996Payment of offering costs and common stock issuance costs — (4,637,647Payment of debt issuance costs (40,000 —Proceeds from subscriptions receivable — 4,280,149Proceeds from issuance of Series A convertible preferred stock 3,262,800 —Proceeds from exercise of common stock warrants 253,289 —Proceeds from the sale of senior secured notes and detachable warrants 15,000,000 —Payments of capital leases obligations (991,028 (884,620Proceeds from debt — 200,416Repayment of debt (2,677,771 (1,059,034Repayment of stockholder notes — (11,601,696Change in restricted cash 216,086 (2,423Proceeds from related party receivable — 826,561Deconsolidation of Sonnet Biotherapeutics, Inc. — (401,091Payment of employee tax witholdings related to the vesting of restricted stock — (71,760Net cash provided by financing activities 16,630,772 39,861,764

Net increase (decrease) in cash 833,632 (6,719,088Cash at beginning of year 2,351,887 9,070,975Cash at end of year $ 3,185,519 $ 2,351,887Supplemental disclosure of cash flow informationCash paid for interest $ 1,339,644 $ 2,061,073Cash paid for income taxes $ 1,500 $ 3,000Supplemental schedule of noncash investing activities:

Purchases of property and equipment in accounts payable and accrued expenses $ 68,507 $ 634,941Supplemental schedule of noncash financing activities:

Accretion of redeemable common stock $ — $ 2,463,160Issuance of common and Series A preferred stock to redeemable preferred stockholders and

noncontrolling interests upon reincorporation $ — $ 11,894,638Reclassification of equity classified stock-based compensation $ — $ 15,118,584Issuance of capital lease obligations in connection with purchase of property and equipment $ 62,230 $ 100,383Series A convertible preferred stock dividends $ 16,985 $ —Deferred offering costs and common stock issuance costs in accounts payable and accrued

expenses $ 630,717 $ —

See accompanying notes to consolidated financial statements.

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1. Organization and Operations

2. Liquidity

TABLE OF CONTENTS

ONCOBIOLOGICS, INC.

Notes to Consolidated Financial Statements

Description of the Business

Oncobiologics, Inc. (“Oncobiologics” or the “Company”) was incorporated in New Jersey on January 5,2010 and started operations in July 2011. Oncobiologics is a clinical-stage biopharmaceutical companyfocused on identifying, developing, manufacturing and commercializing complex biosimilar therapeutics inthe disease areas of immunology and oncology. The Company has established fully integrated in-housedevelopment and manufacturing capabilities that addresses the numerous complex technical andregulatory challenges in developing and commercializing mAb biosimilars. Since inception, the Companyhas advanced two product candidates into clinical trials: a Phase 3-ready biosimilar to adalimumab(Humira ) and a Phase 3-ready biosimilar to bevacizumab (Avastin ). Additionally, the Company has sixpreclinical biosimilar product candidates in various stages of development. The Company is based inCranbury, New Jersey.

The Company has incurred substantial losses and negative cash flows from operations since its inceptionand has an accumulated deficit of  $186.2 million as of September 30, 2017. The Company hassubstantial indebtedness that includes $13.5 million of senior secured notes due in December 2018 and$4.6 million in notes payable to stockholders that are payable on demand. There can be no assurancethat the holders of the stockholder notes will not exercise their right to demand repayment. These factorsraise substantial doubt about the Company’s ability to continue as a going concern. The accompanyingconsolidated financial statements have been prepared on a going concern basis, which contemplates therealization of assets and satisfaction of liabilities in the normal course of business. The consolidatedfinancial statements do not include any adjustments related to the recoverability and classification ofrecorded asset amounts or the amounts and classification of liabilities that might result from the outcomeof this uncertainty.

In September 2017, the Company entered into a purchase agreement (the “Purchase Agreement”) withGMS Tenshi Holdings Pte. Limited, a Singapore private limited company (“GMS Tenshi”), pursuant towhich GMS Tenshi agreed to purchase, in a private placement (the “Private Placement”), $25.0 million ofthe Company’s newly-created voting Series A Convertible Preferred Stock (the “Series A Convertible”),and warrants (the “GMS Tenshi Warrants” and together with the Series A Convertible, the “Securities”) toacquire 16,750,000 shares of common stock. On September 11, 2017, the Company completed the initialsale of 32,628 shares of Series A Convertible to GMS Tenshi for $3,262,800 in cash. In October 2017,the Company completed the sale of the remaining 217,372 shares of Series A Convertible and the GMSTenshi Warrants to GMS Tenshi in the Private Placement, for $21,737,200 in cash (see Note 16).

Also in September 2017, the Company entered into a purchase and exchange agreement (the “ExchangeAgreement”) with two existing investors and holders of its senior secured notes (the “Noteholders”),pursuant to which the Noteholders agreed to exchange $1.5 million aggregate principal amount of Notes(see Note 8) for the Company’s newly-created non-voting Series B Convertible Preferred Stock (the“Series B Convertible”) and forgive any unpaid interest on such exchanged Notes. This exchangeoccurred in connection with the completion of the Private Placement in October 2017.

Management believes that the Company’s existing cash as of September 30, 2017 and the net proceedsfrom the completion of the Private Placement will be sufficient to fund its operations through June 2018.Substantial additional financing will be needed by the Company to fund its operations in the future and tocommercially develop its product candidates. Management is currently evaluating different strategies toobtain the required funding for future operations. These strategies may include, but are not limited to:private placements of equity and/or debt, payments from potential strategic research and development,licensing and/or marketing arrangements with pharmaceutical companies, providing manufacturingservices on a contract basis to other biopharmaceutical companies and public offerings of equity and/ordebt securities. There can be no assurance that these future funding efforts will be successful.

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3. Basis of Presentation and Summary of Significant Accounting Policies

TABLE OF CONTENTS

ONCOBIOLOGICS, INC.

Notes to Consolidated Financial Statements 

The Company’s future operations are highly dependent on a combination of factors, including (i) thetimely and successful completion of additional financing discussed above; (ii) the Company’s ability tocomplete revenue-generating partnerships with pharmaceutical companies; (iii) the success of itsresearch and development; (iv) the development of competitive therapies by other biotechnology andpharmaceutical companies, and, ultimately; (v) regulatory approval and market acceptance of theCompany’s proposed future products.

Basis of presentation

The accompanying consolidated financial statements have been prepared in conformity with U.S.generally accepted accounting principles (“GAAP”). Any reference in these notes to applicable guidance ismeant to refer to GAAP as found in the Accounting Standards Codification (“ASC”) and AccountingStandards Updates (“ASU”) of the Financial Accounting Standards Board (“FASB”).

Use of estimates

The preparation of the consolidated financial statements in conformity with GAAP requires managementto make estimates and assumptions that affect the reported amounts of assets and liabilities anddisclosure of contingent assets and liabilities at the date of the financial statements and reported amountsof revenues and expenses during the reporting period. Actual results could differ from those estimates.Due to the uncertainty of factors surrounding the estimates or judgments used in the preparation of theconsolidated financial statements, actual results may materially vary from these estimates. Estimates andassumptions are periodically reviewed and the effects of revisions are reflected in the consolidatedfinancial statements in the period they are determined to be necessary.

Restricted cash

As of September 30, 2016, the Company had $216,086 in certificates of deposit related to therequirements of the Company’s bank loans. In December 2016, the Company repaid the senior bankloans therefore releasing this requirement.

Fair value of financial instruments

At September 30, 2017 and 2016, the Company’s financial instruments included accounts payable,accrued expenses, stockholder notes and senior secured debt. The carrying amount of accounts payableand accrued expenses approximates fair value due to the short-term maturities of these instruments. Asof September 30, 2017, the carrying value of the warrant liability was the estimated fair value of theliability (See Note 4).

Prepaid expenses and other current assets

As of September 30, 2017 and 2016, the Company had prepaid research and development of  $199,740and $1,979,527, respectively.

Property and equipment

Property and equipment are recorded at cost. Depreciation and amortization is determined using thestraight-line method over the estimated useful lives ranging from 3 to 10 years. Leasehold improvementsare amortized over the life of the lease or the estimated useful life of the assets, whichever is shorter.Expenditures for maintenance and repairs are expensed as incurred while renewals and betterments arecapitalized. When property and equipment is sold or otherwise disposed of, the cost and relatedaccumulated depreciation are eliminated from the accounts and any resulting gain or loss is reflected inoperations.

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ONCOBIOLOGICS, INC.

Notes to Consolidated Financial Statements 

Long-lived assets

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicatethat the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and usedis measured by a comparison of the carrying amount of an asset to future net cash flows expected to begenerated. Impairment charges are recognized at the amount by which the carrying amount of an assetexceeds the fair value of the asset. Assets to be disposed of are reported at the lower of the carryingamount or the fair value less costs to sell. The Company has not recognized any impairment of long-livedassets for the years ended September 30, 2017 and 2016.

Stock-based compensation

The Company measures equity classified stock-based awards granted to employees and directors basedon the estimated fair value on the date of grant and recognizes compensation expense of those awards,net of estimated forfeitures, on a straight-line basis over the requisite service period, which is generallythe vesting period of the respective award.

The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes optionpricing model, which is described more fully in Note 12. The fair value of each restricted stock award ismeasured as the fair value per share of the Company’s common stock on the date of grant.

Stock-based awards granted to consultants and non-employees are measured based on the fair value ofthe award on the date on which the related services are completed. Compensation expense is recognizedover the period during which services are rendered by such consultants and non-employees untilcompleted. At the end of each financial reporting period prior to completion of the service, the fair value ofthese awards is remeasured using the then-current fair value of the Company’s common stock andupdated assumption inputs in the Black-Scholes option-pricing model.

Revenue recognition

The Company’s revenue is generated primarily through collaboration research and license agreements.The terms of these agreements generally contain multiple deliverables which may include (i) licenses, (ii)research and development activities, clinical manufacturing, and (iii) product supply. The payment termsof these agreements may include nonrefundable upfront fees, payments for research and developmentactivities, payments based upon the achievement of certain milestones, royalty payments based onproduct sales derived from the collaboration, and payments for supplying product.

The Company considers whether the deliverables under the arrangement represent separate units ofaccounting. In determining the units of accounting, management evaluates certain criteria, includingwhether the deliverables have stand-alone value. The consideration received is allocated to theseparate units of accounting using the relative selling price method, and the applicable revenuerecognition criteria are applied to each of the separate units.

The Company typically receives upfront, nonrefundable payments when licensing its intellectual property.For intellectual property licenses that do not have stand-alone value from the other deliverables to beprovided, the upfront fee is deferred and revenue is recognized over the contractual or estimatedperformance period, which is typically the term of the research and development obligations. The periodsover which revenue is recognized are subject to estimates by management and may change over thecourse of the research and development agreement. Such a change could have a material impact on theamount of revenue the Company records in future periods. Payments or reimbursements resulting fromthe Company’s research and development efforts are recognized as the services are performed. Amountsreceived prior to satisfying the above revenue recognition criteria are recorded as deferred revenue.

The Company recognizes revenue from milestone payments when: (i) the milestone event is substantiveand its achievability was not reasonably assured at the inception of the agreement, and (ii) the Companydoes not have ongoing performance obligations related to the achievement of the milestone earned.Milestone

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ONCOBIOLOGICS, INC.

Notes to Consolidated Financial Statements 

payments are considered substantive if all of the following conditions are met: the milestone payment(a) is commensurate with either the Company’s performance to achieve the milestone or theenhancement of the value of the delivered item or items as a result of a specific outcome resulting fromthe Company’s performance to achieve the milestone, (b) relates solely to past performance, and (c) isreasonable relative to all of the deliverables and payment terms (including other potential milestoneconsideration) within the arrangement.

Research and development

Research and development costs are expensed as incurred and consist primarily of funds paid to thirdparties for the provision of services for product candidate development, clinical and preclinicaldevelopment and related supply and manufacturing costs, and regulatory compliance costs. At the end ofthe reporting period, the Company compares payments made to third-party service providers to theestimated progress toward completion of the research or development objectives. Such estimates aresubject to change as additional information becomes available. Depending on the timing of payments tothe service providers and the progress that the Company estimates has been made as a result of theservice provided, the Company may record net prepaid or accrued expense relating to these costs.

Upfront milestone payments made to third parties who perform research and development services on theCompany’s behalf are expensed as services are rendered. Costs incurred in obtaining technologylicenses are charged to research and development expense as acquired in-process research anddevelopment if the technology licensed has not reached technological feasibility and has no alternativefuture use.

Income taxes

The Company accounts for income taxes using the asset and liability method. Under the asset andliability method, deferred tax assets and liabilities are recognized for the future tax consequencesattributable to differences between the financial statement carrying amounts of existing assets andliabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enactedtax rates expected to apply to taxable income in the years in which those temporary differences areexpected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in taxrates is recognized in income in the period that includes the enactment date. A valuation allowance isrecorded to the extent it is more likely than not that some portion or all of the deferred tax assets will notbe realized.

Net loss per share

Basic net loss per common share is determined by dividing net loss applicable to common stockholdersby the weighted-average common shares outstanding during the period.

For purposes of calculating diluted net loss per common share, the denominator includes both theweighted average common shares outstanding and the number of common stock equivalents if theinclusion of such common stock equivalents would be dilutive. Dilutive common stock equivalentspotentially include warrants, stock options and non-vested restricted stock awards using the treasurystock method. The diluted net loss per common share calculation is further affected by an add-back ofchange in fair value of warrant liability to the numerator under the assumption that the change in fairvalue of warrant liability would not have been incurred if the warrants had been converted into commonstock.

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ONCOBIOLOGICS, INC.

Notes to Consolidated Financial Statements 

The following table sets forth the computation of basic earnings per share and diluted earnings per shareas of September 30, 2017 and 2016:

Year ended September 30,2017 2016

Basic Earnings Per ShareNet loss $(40,025,870 $(63,138,969Common stock outstanding (weighted average) 24,022,371 17,212,983Basic net loss per share $ (1.67 $ (3.67Diluted Earnings Per ShareNet loss $(40,025,870 $(63,138,969Add change in fair value of warrant liability (3,158,469 —Diluted net loss (43,184,339 (63,138,969

Common stock outstanding (weighted average) 24,022,371 17,212,983Add shares from dilutive warrants 19,418 —Common stock equivalents 24,041,789 17,212,983Diluted net loss per share $ (1.80 $ (3.67

The following potentially dilutive securities have been excluded from the computation of diluted weighted-average shares outstanding as of September 30, 2017 and 2016, as they would be antidilutive:

September 30,2017 2016

Performance-based stock units 175,530 247,309Restricted stock units 939,879 1,094,269Common stock warrants 7,484,504 8,186,934

Correction of Immaterial Error Related to Prior Periods

During the year ended September 30, 2017, the Company identified an error related to its accounting andclassification for the 82,000 square feet of office and laboratory space in Cranbury, New Jersey that wasentered into during August 2015. Due to the Company’s involvement in the construction required tocomplete the leased facility, the Company concluded that the lease should have been accounted for as adirect financing arrangement, whereby the Company records, the fair value of the asset in property andequipment, net on the consolidated balance sheets. A corresponding liability is also recorded andamortized over the lease term through monthly rental payments using the effective interest method.

As a result of the error, property and equipment and other long-term liabilities were each understated by$1.7 million in the Company’s consolidated balance sheet as of September 30, 2015. As ofSeptember 30, 2016, property and equipment and other liabilities were each understated by $1.7 million.For the year ended September 30, 2016, rent expense was overstated by $0.4 million and interestexpense was understated by $0.4 million. This was primarily attributable to the reclassification of rentalpayments into interest expense payments in connection with a financing arrangement rather than anoperating lease arrangement, as previously presented.

The Company reviewed the impact of this error on the prior periods in accordance with Securities andExchange Commission (“SEC”) Staff Accounting Bulletin No. 99, “Materiality,” and determined that theerror was not material to the prior periods. However, the Company has corrected the consolidatedbalance sheet, as of September 30, 2016, by increasing property and equipment and other long-termliabilities each by $1.7 million. The Company has corrected the consolidated statement of operations forthe year ended September 30, 2016 by decreasing research and development expenses and general andadministrative expenses by $0.3 million and $0.1 million, respectively, and by increasing interest expenseby $0.4 million.

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4. Fair Value Measurements

TABLE OF CONTENTS

ONCOBIOLOGICS, INC.

Notes to Consolidated Financial Statements 

Recently issued and adopted accounting pronouncements

In May 2014, the FASB issued ASU, No. 2014-09, Revenue from Contracts with Customers . Thisguidance requires an entity to recognize revenue to depict the transfer of promised goods or services tocustomers in an amount that reflects the consideration to which the entity expects to be entitled inexchange for those goods or services. This guidance also requires an entity to disclose sufficientinformation to enable users of financial statements to understand the nature, amount, timing anduncertainty of revenue and cash flows arising from contracts with customers. Qualitative and quantitativeinformation is required about:

Contracts with customers — including revenue and impairments recognized, disaggregation ofrevenue and information about contract balances and performance obligations (including thetransaction price allocated to the remaining performance obligations).

Significant judgments and changes in judgments — determining the timing of satisfaction ofperformance obligations (over time or at a point in time), and determining the transaction price andamounts allocated to performance obligations.

Certain assets — assets recognized from the costs to obtain or fulfill a contract.

In July 2015, the FASB delayed the effective date of this guidance. As a result, this guidance will beeffective for annual reporting periods beginning after December 15, 2017, including interim periods withinthat reporting period. Earlier application is permitted only as of annual reporting periods beginning afterDecember 15, 2016, including interim reporting periods within that reporting period. The Company iscurrently evaluating the impact that this guidance will have on its consolidated results of operations,financial position and cash flows.

In August 2014, the FASB issued ASU No. 2014-15, Disclosure of Uncertainties about an Entity’s Abilityto Continue as a Going Concern. The amendments in this update explicitly require a company’smanagement to assess an entity’s ability to continue as a going concern, and to provide related footnotedisclosures in certain circumstances. The Company adopted this new standard effective in the quarterended after December 31, 2016.

In February 2016, the FASB issued ASU No. 2016-02, Leases, (Topic 842). This new ASU represents awholesale change to lease accounting and introduces a lease model that brings most leases on thebalance sheet. It also eliminates the required use of bright-line tests in current U.S. GAAP for determininglease classification. This ASU is effective for annual periods beginning after December 15, 2018 (i.e.,calendar periods beginning on January 1, 2019), and interim periods thereafter. Earlier application ispermitted for all entities. The Company is currently evaluating the impact of ASU 2016-02 on itsconsolidated financial statements.

In May 2017, the FASB issued ASU No. 2017-09, Compensation — Stock Compensation (Topic 718):Scope of Modification Accounting. This new ASU is intended provide clarity and reduce both the diversityin practice of and cost and complexity of applying the guidance in Topic 718, Compensation — StockCompensation, to a change to the terms or conditions of a share-based payment award. This ASUprovides guidance about which changes to the terms or conditions of a share-based payment awardrequire an entity to apply modification accounting in Topic 718. This ASU is effective for all entities forannual periods, and interim periods within those annual periods, beginning after December 15, 2017.Early adoption is permitted. This ASU is not expected to have a material impact on the Company’sconsolidated financial statements.

Certain assets and liabilities are carried at fair value under GAAP. Fair value is defined as the exchangeprice that would be received for an asset or paid to transfer a liability (an exit price) in the principal ormost advantageous market for the asset or liability in an orderly transaction between market participantson the measurement date. Valuation techniques used to measure fair value must maximize the use ofobservable

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• Level 1 — Quoted prices in active markets for identical assets or liabilities.

• Level 2 — Observable inputs (other than Level 1 quoted prices), such as quoted prices in activemarkets for similar assets or liabilities, quoted prices in markets that are not active for identicalor similar assets or liabilities, or other inputs that are observable or can be corroborated byobservable market data.

• Level 3 — Unobservable inputs that are supported by little or no market activity and that aresignificant to determining the fair value of the assets or liabilities, including pricing models,discounted cash flow methodologies and similar techniques.

TABLE OF CONTENTS

ONCOBIOLOGICS, INC.

Notes to Consolidated Financial Statements 

inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair valueare to be classified and disclosed in one of the following three levels of the fair value hierarchy, of whichthe first two are considered observable and the last is considered unobservable:

The asset’s or liability’s fair value measurement level within the fair value hierarchy is based on the lowestlevel of any input that is significant to the fair value measurement. Valuation techniques used need tomaximize the use of observable inputs and minimize the use of unobservable inputs.

The following table presents the Company’s assets and liabilities that are measured at fair value on arecurring basis:

September 30, 2017(Level 1) (Level 2) (Level 3)

LiabilitiesWarrant liability $ — $ — $2,274,954

The table presented below is a summary of changes in the fair value of the Company’s Level 3 valuationfor the warrant liability for the year ended September 30, 2017:

Balance at October 1, 2016 $ —Issuance of warrants 5,493,619Exercise of warrants (60,196Change in fair value (3,158,469Balance at September 30, 2017 $ 2,274,954

The Senior Note Warrants issued in connection with the Notes (see Note 8) are classified as liabilities onthe accompanying consolidated balance sheet as the Senior Note Warrants include cash settlementfeatures at the option of the holders under certain circumstances. The warrant liability is revalued eachreporting period with the change in fair value recorded in the accompanying consolidated statements ofoperations until the warrants are exercised or expire. The fair value of the warrant liability is estimatedusing the Black- Scholes option pricing model using the following assumptions:

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5. Property and Equipment

TABLE OF CONTENTS

ONCOBIOLOGICS, INC.

Notes to Consolidated Financial Statements 

September 30, 2017

Risk-free interest rate 1.77%Remaining contractual life of warrant 4.67 yearsExpected volatility 82%Annual dividend yield 0%Fair value of common stock $1.37 per share

Property and equipment, net, consists of:

September 30,2017 2016

Laboratory equipment $11,574,473 $11,452,858Leasehold improvements 10,032,640 10,031,739Computer software and hardware 472,054 421,206Construction in progress 2,654,675 2,714,690

24,733,843 24,620,493Less: accumulated depreciation and amortization (8,644,941 (5,961,940

$16,088,902 $18,658,553

Depreciation and amortization expense for the years ended September 30, 2017 and 2016 was$2,692,100 and $2,394,279, respectively.

At September 30, 2017 and 2016, $3,692,913 and $3,630,683, respectively represents laboratoryequipment under capital leases. The term of the leases are between 22 and 36 months and qualify ascapital leases. The leases bear interest between 5.0 % and 19.4 %. At September 30, 2017 and 2016,$1,061,901 and $732,002, respectively, of accumulated depreciation related to this leased equipment hasbeen recognized.

The following is a schedule of future minimum lease payments under capital leases as of September 30,2017 for the years ending September 30:

2018 $ 367,7822019 23,8962020 5,974

397,652Less: amounts representing interest (28,465Less: current portion (341,120Capital lease obligations, excluding current portion $ 28,067

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6. Accrued Expenses

7. Stockholder Notes

8. Debt

TABLE OF CONTENTS

ONCOBIOLOGICS, INC.

Notes to Consolidated Financial Statements 

Accrued expenses consists of:

September 30,2017 2016

Compensation $3,688,592 $3,884,386Research and development . 1,637,657 1,343,910Interest payable 1,047,122 234,754Deferred offering costs — 26,028Professional fees 521,973 486,705Director fees 376,695 73,125Other accrued expenses 65,430 73,034

$7,337,469 $6,121,942

September 30,2017 2016

Restricted stock purchase notes $ 800,000 $ 800,000Common stock repurchase note 2,812,500 2,812,500Working capital notes 1,000,000 1,000,000

4,612,500 4,612,500Less: current portion (4,612,500 (4,612,500

$ — $ —

The Company previously repurchased shares of its restricted stock in exchange for $1,097,750 in noteswhich bear interest at rates ranging from 0% to 4% per annum and are due on demand.

The Company has a $2,812,500 note payable related to the previous repurchase of common stock thatdoes not bear interest and is due on demand.

The Company has borrowed from stockholders for working capital purposes. The notes bear interest from0% to 30% per annum. One of the notes is collateralized by 0.3 million common shares of the Company’sfounding stockholder and Chief Executive Officer (“CEO”). The notes are due on demand.

During the years ended September 30, 2017 and 2016, the Company recognized interest expense relatedto the stockholder notes of  $320,000 and $589,675, respectively.

Senior Secured Notes

September 30, 2017

Senior secured notes $ 15,000,000Unamortized debt discount (1,768,300

$ 13,231,700

In October, November and December 2016, the Company issued $1.85 million aggregate principalamount of unsecured bridge notes to accredited investors. These unsecured notes bore interest at a rateof 15% per year and had a one-year maturity date from the date of issuance. The unsecured notes wereexchanged for senior secured promissory notes in December 2016 as described below.

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ONCOBIOLOGICS, INC.

Notes to Consolidated Financial Statements 

In December 2016, the Company entered into a Note and Warrant Purchase Agreement (the “NWPA”)with accredited investors providing for the issuance and sale of up to $10.0 million of senior securedpromissory notes (the “Notes”), which bear interest at a rate of 5% per year and mature December 22,2017 and warrants (the “Senior Note Warrants”) to acquire an aggregate 2.3 million shares of theCompany’s common stock at an exercise price of  $3.00 per share, which have a five-year term. TheCompany closed the initial sale and purchase of the Notes and Senior Note Warrants in December 2016,issuing $8.35 million aggregate principal amount of Notes and Senior Note Warrants to acquire up to1,920,500 shares of the Company’s common stock in exchange for $6.5 million of cash and an aggregateof   $1.85 million of existing unsecured bridge notes issued by the Company in October, November andDecember 2016. The proceeds were first allocated to the warrant liability based on an initial fair value of $3.3 million with a corresponding amount recorded as a debt discount. In addition, the Company incurred$40,000 of debt issuance costs that have been recorded as a debt discount. The debt discount is beingamortized into interest expense over the term of the Notes.

The Company used $2.4 million of the proceeds from the sale of the Notes to pay off its remaining seniorsecured bank loans, and will use the remainder for working capital purposes. In January 2017, theCompany issued additional Notes and Senior Note Warrants for $1.65 million of cash.

In April 2017, the Company entered into the First Amendment to the NWPA (the “Amendment”) with therequired holders of its Notes named therein, to amend certain terms of the NWPA. The primary purposeof the Amendment was to increase the aggregate principal amount of Notes that may be sold under theNWPA from $10.0 million to $15.0 million, and permit the issuance of additional Senior Note Warrants toacquire an aggregate 1,665,000 shares of the Company’s common stock and extend the time that theCompany may issue additional Notes and Senior Note Warrants without approval of the holders ofexisting notes from 90 days to 180 days. Notes sold under the Amendment bear interest at a rate of 5%per annum and mature in December 2017. In September 2017, in connection with the Private Placement,the maturity date of the Notes was extended by one year to December 2018.

During April and May 2017, the Company issued an additional $5.0 million of Notes and Senior NoteWarrants to acquire an aggregate of 1,304,500 shares of its common stock. The proceeds were firstallocated to the warrant liability based on an initial fair value of  $1.4 million with a corresponding amountrecorded as a debt discount. In addition, the Company incurred $3,635 of debt issuance costs that havebeen recorded as a debt discount. The debt discount is being amortized into interest expense over theterm of the Notes.

Under the NWPA and the Amendment, the Company agreed to customary negative covenants restrictingits ability to repay indebtedness to officers, pay dividends to stockholders, repay or incur otherindebtedness other than as permitted, grant or suffer to exist a security interest in any of the Company’sassets, other than as permitted, or enter into any transactions with affiliates. In addition to the negativecovenants in the NWPA, the Notes include customary events of default. In connection with the closing ofthe initial sale of the Notes and Senior Note Warrants, the Company entered into a Security Agreementand an Intellectual Property Security Agreement, each dated December 22, 2016, granting the holders ofthe Notes a security interest in all of its assets, as well as a Registration Rights Agreement datedFebruary 3, 2017.

In September 2017, the Company entered into the Exchange Agreement with the Noteholders, pursuantto which the Noteholders agreed to exchange $1.5 million aggregate principal amount of Notes forSeries B Convertible and forgive any unpaid interest on such exchanged Notes. This exchange occurredin connection with the completion of the Private Placement in October 2017.

Interest expense on the Notes for the year ended September 30, 2017 was $4,441,886.

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9. Commitments

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ONCOBIOLOGICS, INC.

Notes to Consolidated Financial Statements 

Other Indebtedness

In addition to the Notes, the Company has several other types of outstanding debt consisting of term bankloans and equipment loans.

September 30,2017 2016

Term loans – Bank $ — $2,526,502Equipment loans 203,710 354,979Unamortized financing costs — (61,224

203,710 2,820,257Less: current portion (52,600 (586,454Long-term debt $151,110 $2,233,803

The term bank loans bore interest at the prime rate plus 2.75% and were adjusted monthly. InDecember 2016, the remaining balance of the term loans were paid in full releasing the priorrequirements of a certificate of deposit.

The equipment loans bear interest at rates ranging from 12% to 16% with the original term of the loansranging from 1 to 5 years. Minimum monthly payments of principal and interest under the equipment loansare $19,379 and are collateralized by the related equipment purchased and an unconditional personalguarantee by the founding stockholder and CEO.

Interest expense on the above loans for the years ended September 30, 2017 and 2016 was $230,824and $287,280, respectively.

Future maturities of other indebtedness at September 30, 2017 are as follows for the years endingSeptember 30:

2018 $ 52,6002019 151,110

$203,710

Selexis Commercial License Agreements

In April 2013, the Company entered into commercial license agreements with Selexis for each of theONS-3010, ONS-1045 and ONS-1050 biosimilar product candidates (which agreements weresubsequently amended on May 21, 2014). Under the terms of each commercial license agreement, theCompany acquired a non-exclusive worldwide license under the Selexis Technology to use the applicableSelexis expression technology along with the resulting Selexis materials/ cell lines, each developed underthe research license, to manufacture and commercialize licensed and final products, with a limited right tosublicense.

The Company paid an upfront licensing fee to Selexis for each commercial license and also agreed to paya fixed milestone payment for each licensed product. In addition, the Company is required to pay a lowsingle-digit royalty on a final product-by-final product and country-by-country basis, based on worldwidenet sales of such final products by the Company or any of the Company’s affiliates or sublicensees duringthe royalty term. The royalty term for each final product in each country is the period commencing fromthe first commercial sale of the applicable final product in the applicable country and ending on theexpiration of the specified patent coverage. At any time during the term, the Company has the right toterminate its royalty payment obligation by providing written notice to Selexis and paying Selexis a royaltytermination fee.

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ONCOBIOLOGICS, INC.

Notes to Consolidated Financial Statements 

Each of the Company’s commercial agreements with Selexis will expire upon the expiration of allapplicable Selexis patent rights. Either party may terminate the related agreement in the event of anuncured material breach by the other party or in the event the other party becomes subject to specifiedbankruptcy, winding up or similar circumstances. Either party may also terminate the related agreementunder designated circumstances if the Selexis Technology infringes third-party intellectual property rights.In addition, the Company has the right to terminate each of the commercial agreements at any time at itsconvenience; however, with respect to the agreements relating to ONS-3010 and ONS-1045, this right issubject to the licensee’s consent pursuant to a corresponding letter the Company executed in conjunctionwith the standby agreement entered into between Selexis and Laboratories Liomont, S.A. de C.V.(“Liomont”) in November 2014.

The standby agreement permits Liomont to assume the license under the applicable commercialagreement for Mexico upon specified triggering events involving our bankruptcy, insolvency or similarcircumstances.

Technology License

The Company entered into a technology license agreement that will require milestone payments of $353,600 (based on an exchange rate on September 30, 2017 for converting Swiss Francs to U.S.dollars) to the licensor by the Company upon achievement of certain clinical milestones and pay a singledigit royalty on net sales by the Company utilizing such technology. The Company also has thecontractual right to buy out the royalty payments at a future date.

Leases

In July 2016, the Company entered into a fifth amendment to its lease agreement for its office andoperating space which, as amended, has a term ending in June 2021. Rent expense under operatingleases was $1,352,708 and $1,207,882 for the years ended September 30, 2017 and 2016, respectively.The Company recognizes rent expense on a straight-line basis over the lease period and has accrued forrent expense incurred but not yet paid. Landlord allowances for tenant improvements are deferred andrecognized as a reduction to rent expense on a straight line basis and over the remaining lease term.

Additionally, in August 2015, the Company entered into a lease for approximately 82,000 square feet ofoffice and laboratory space in Cranbury, New Jersey, with lease payments that commenced inMarch 2016 and expires in March 2026. The lease is accounted for as a financing arrangement to whicha liability is recorded and amortized over the lease term down to the expected asset value at the end ofthe lease. During the years ended September 30, 2017 and 2016, the Company recorded interestexpense of  $421,028 and $383,864, respectively.

Future minimum payments under noncancelable operating leases and the financing arrangement atSeptember 30, 2017 are as follows for the years ending September 30:

Operating Leases

Financing Arrangement

2018 $1,299,664 $ 418,2002019 1,333,427 418,2002020 1,353,345 418,2002021 1,180,967 454,9362022 372,964 481,176Thereafter 1,096,012 1,644,018

$6,636,379 $3,834,730

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10. Stockholders’ Equity (Deficit)

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ONCOBIOLOGICS, INC.

Notes to Consolidated Financial Statements 

Employee Benefit Plan

The Company maintains a defined contribution 401(k) plan in which employees may contribute up to100% of their salary and bonus, subject to statutory maximum contribution amounts. The Companymatches 100% of the first 3% of employee contributions. The Company assumes all administrative costsof the Plan. For the years ended September 30, 2017 and 2016, the expense relating to the matchingcontribution was $209,782 and $191,097, respectively.

Lincoln Park Capital, LLC transaction

In March 2017, the Company entered into a Purchase Agreement and a registration rights agreementwith an accredited investor, Lincoln Park Capital, LLC (“Lincoln Park”), providing for the purchase of up to$15.4 million of the Company’s common stock over the 30-month term of the purchase agreement.

In connection with the purchase agreement, the Company issued 113,205 shares of its common stock asinitial commitment shares, to Lincoln Park and the Company will issue, pro rata, up to an additional113,206 shares of its common stock as additional commitment shares to Lincoln Park in connection withany additional purchases.

Under the terms and subject to the conditions of the purchase agreement, the Company has the right, butnot the obligation, to sell to Lincoln Park, and Lincoln Park is obligated to purchase, up to an additional$15.0 million worth of shares of the Company’s common stock. As contemplated by the purchaseagreement, and so long as the closing price of the Company’s common stock exceeds $1.50 per share,the Company may direct Lincoln Park, at the Company’s sole discretion to purchase up to 30,000 sharesof its common stock on any business day. The price per share for such purchases will be equal to thelower of: (i) the lowest sale price on the applicable purchase date and (ii) the arithmetic average of thethree (3) lowest closing sale prices for the Company’s common stock during the ten (10) consecutivebusiness days ending on the business day immediately preceding such purchase date (in each case, tobe appropriately adjusted for any reorganization, recapitalization, non-cash dividend, stock split or othersimilar transaction that occurs on or after the date of the purchase agreement). The maximum amount ofshares subject to any single regular purchase increases as the Company’s share price increases, subjectto a maximum of $1.0 million.

In addition to regular purchases, the Company may also direct Lincoln Park to purchase other amounts asaccelerated purchases or as additional purchases if the closing sale price of the common stock exceedscertain threshold prices as set forth in the purchase agreement. In all instances, the Company may notsell shares of its common stock to Lincoln Park under the purchase agreement if it would result in LincolnPark beneficially owning more than 4.99% of its common stock. There are neither trading volumerequirements nor restrictions under the purchase agreement nor upper limits on the price per share thatLincoln Park must pay for shares of common stock.

The purchase agreement and the registration rights agreement contain customary representations,warranties, agreements and conditions to completing future sale transactions, indemnification rights andobligations of the parties. The Company has the right to terminate the purchase agreement at any time, atno cost or penalty. During any “event of default” under the purchase agreement, all of which are outside ofLincoln Park’s control, Lincoln Park does not have the right to terminate the purchase agreement;however, the Company may not initiate any regular or other purchase of shares by Lincoln Park, untilsuch event of default is cured. In addition, in the event of bankruptcy proceedings by or against theCompany, the purchase agreement will automatically terminate.

During the year ended September 30, 2017, the Company sold 737,817 shares of common stock toLincoln Park for $1,620,931, and incurred $147,540 of issuance costs. In addition, the Company issued122,418 shares of common stock to Lincoln Park as commitment shares pursuant to the purchaseagreement.

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11. Convertible Preferred Stock

TABLE OF CONTENTS

ONCOBIOLOGICS, INC.

Notes to Consolidated Financial Statements 

Common stock

From October 2015 through January 2016, the Company sold 573,388 shares of its common stock at$29.05 per share raising $16,137,913 in net proceeds. In May 2016, upon consummation of its initialpublic offering (“IPO”) and concurrent private placement, the Company sold 5,833,334 units at $6.00 perunit and completed a concurrent private placement of an additional 833,332 shares of its common stock,416,666 Series A warrants and 416,666 Series B warrants, at the same price, raising $33,784,205 inaggregate net proceeds. Each unit consisted of one share of the Company’s common stock and ½ aSeries A warrants and ½ a Series B warrant.

Concurrent with the closing of the IPO, 1,739,130 shares of redeemable common stock were reclassifiedto common stock upon the lapse of a contractual redemption right.

Each share of common stock entitles the holder to one vote on all matters submitted to a vote of theCompany’s stockholders. Subject to preferences that may apply to any outstanding preferred stock,holders of common stock are entitled to receive ratably any dividends that the Company’s board ofdirectors may declare out of funds legally available for that purpose on a non-cumulative basis. Nodividends had been declared through September 30, 2017.

Common stock warrants

As of September 30, 2017, the Company had the following warrants outstanding to acquire shares of itscommon stock:

Outstanding

Exercise price per

share Expiration date Series A warrants 3,333,333 $ 6.60 February 18, 2018 Series B warrants 3,333,333 $ 8.50 May 18, 2018 Common stock warrants issued with IPO 817,838 $ 0.01 November 11, 2019 Common stock warrants issued with senior secured notes 3,521,501 $ 3.00 December 22, 2021

11,006,005

During the year ended September 30, 2017, warrants to purchase 704,019 and 82,999 shares withexercise prices of  $0.01 and $3.00 per share respectively, were exercised.

As discussed in Note 1, the Company entered into the Purchase Agreement with GMS Tenshi inSeptember 2017 pursuant to which GMS Tenshi agreed to purchase an aggregate 250,000 shares ofSeries A Convertible at a purchase price of    $100.00 per share, for an aggregate purchase price of $25.0 million in cash. The Series A Convertible is initially convertible into 37,795,948 shares of theCompany’s common stock, representing an effective conversion rate of  $0.66 per share, whichrepresents a discount to the market value of the Company’s common stock as of September 7, 2017 (onwhich date, the closing price of the Company’s common stock was $0.90 per share). In addition to thesale of the Series A Preferred, the Company also agreed to issue GMS Tenshi the GMS Tenshi Warrants,which have a term of 8-years and an initial exercise price of $0.90 per share.

In September 2017, the Company closed the initial sale of 32,628 shares of Series A Convertible for anaggregate purchase price of  $3,262,800. In connection with the initial sale, the Company recognized abeneficial conversion charge of  $1,176,743 which represents the in-the-money value of the conversionrate as of the date of sale. GMS Tenshi purchased the remaining 217,372 shares of Series A Convertibleand the GMS Tenshi Warrants in October 2017, for a purchase price of  $21,737,200.

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ONCOBIOLOGICS, INC.

Notes to Consolidated Financial Statements 

In connection with the entry into the Purchase Agreement, the Company filed a Certificate of Designationof Series A Convertible Preferred Stock and Series B Convertible Preferred Stock of Oncobiologics, Inc.(the “Certificate of Designation”) with the Secretary of State of the State of Delaware.

Series A Convertible Preferred Stock

The Series A Convertible accrue dividends at a rate of 10% per annum, compounded quarterly, payablequarterly at the Company’s option in cash or in kind in additional shares of Series A Convertible, althoughthe initial dividends payable on the shares of Series A Convertible issued in September 2017, whileaccruing from issuance, will be payable in December 2017. The Series A Convertible will also be entitledto dividends on an as-if-converted basis in the same form as any dividends actually paid on shares ofcommon stock or other securities. The initial conversion rate is subject to appropriate adjustment in theevent of a stock split, stock dividend, combination, reclassification or other recapitalization affecting thecommon stock.

The holders of the Series A Convertible will have the right to vote on matters submitted to a vote of theCompany’s stockholders on an as-converted basis. In addition, without the prior written consent of amajority of the outstanding shares of Series A Convertible, the Company may not take certain actions.

The terms of the Series A Convertible distinguish between certain liquidation events (such as a voluntaryor involuntary liquidation, dissolution or winding up of the Company) and “deemed” liquidation events(such as a sale of all or substantially all of the Company’s assets, various merger and reorganizationtransactions, being delisted from NASDAQ, and the occurrence of an event of default under the terms ofthe Notes), in each case as defined in the Certificate of Designation. In the event of a liquidation (asdefined in the Certificate of Designation) the liquidation preference payable equals the sum of  (A) 110%of the stated value per share plus (B) (x) 110% of any accrued but unpaid preferred dividends (as definedin the Certificate of Designation) plus (y) any unpaid participating dividends (as defined in the Certificateof Designation). In the case of a deemed liquidation event (as defined in the Certificate of Designation),the multiplier is increased to 120%.

The Series A Convertible is convertible at any time at the option of the holder based on the thenapplicable conversion rate. If conversion is in connection with a liquidation, the holder is entitled to receive110% of the number of shares of common stock issuable based upon the then applicable conversion rate.In the event of a deemed liquidation event (as defined in the Certificate of Designation), the multiplier isincreased to 120%.

Additionally, the holder may require the Company to redeem the Series A Convertible in the event ofdeemed liquidation event for the sum of  (A) 120% of the stated value per share plus (B) (x) 120% of anyaccrued but unpaid preferred dividends (as defined in the Certificate of Designation) plus (y) any unpaidparticipating dividends (as defined in the Certificate of Designation), although such redemption may notbe made without the consent of the senior secured noteholders if such notes are outstanding at the timeof any such redemption.

Series B Convertible Preferred Stock

In September 2017, the Company entered the Exchange Agreement with the Noteholders whereby, uponconsummation of the sale of the remaining 217,372 shares of Series A Convertible to GMS Tenshi in thePrivate Placement, the Noteholders would exchange $1,500,000 in aggregate principal amount of Notesfor 1,500,000 shares of Series B Convertible. The exchange occurred in October 2017.

The Series B Convertible are non-voting, do not accrue dividends nor do the shares of Series BConvertible have any specific rights or preferences, and have a stated value of  $1.00 per share and areconvertible into 2,112,676 shares of common stock. The Series B Convertible are not convertible intocommon stock if the holder thereof would beneficially own more than 9.99% of the common stock, or, ifduring the first six-month period following the closing of the exchange, 7.50%, but automatically convertsinto common stock in part from time to time if the holder beneficially owns below a certain beneficialownership threshold of the common stock.

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12. Stock-Based Compensation

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ONCOBIOLOGICS, INC.

Notes to Consolidated Financial Statements 

Former Series A Preferred Stock

In connection with the May 2016 closing of the Company’s IPO, all outstanding shares of the formerSeries A Preferred converted into 1,969,818 shares of common stock.

2011 Equity Incentive Plan

The Company’s 2011 Equity Compensation Plan (the “2011 Plan”) provided for the Company to sell orissue restricted common stock, restricted stock units (“RSUs”), performance-based awards, cash-basedawards or to grant stock options for the purchase of common stock to officers, employees, consultantsand directors of the Company. The 2011 Plan was administered by the board of directors or, at thediscretion of the board of directors, by a committee of the board. The number of shares of common stockreserved for issuance under the 2011 Plan is 1,159,420. As of September 30, 2017, performance-basedstock unit awards (“PSUs”) representing 175,528 shares of the Company’s common stock wereoutstanding under the 2011 Plan. In light of the December 2015 adoption of the 2015 Equity IncentivePlan, no future awards under the 2011 Plan will be granted.

2015 Equity Incentive Plan

In December 2015, the Company adopted the 2015 Equity Incentive Plan (the “2015 Plan”). The 2015Plan provides for the grant of stock options, stock appreciation rights, restricted stock awards, restrictedstock unit awards, performance stock awards and other forms of equity compensation to Companyemployees, directors and consultants. The maximum number of shares of common stock that may beissued under the 2015 Plan is 2,638,101 shares. As of September 30, 2017, RSUs representing 939,879shares of the Company’s common stock were outstanding under the 2015 Plan and 1,214,309 sharesremained available for grant under the 2015 Plan.

The Company recorded stock-based compensation expense in the following expense categories of itsconsolidated statements of operations for the years ended September 30, 2017 and 2016:

Year ended September 30,2017 2016

Research and development $1,001,022 $ 2,044,379General and administrative 7,570,408 10,405,700

$8,571,430 $12,450,079

Year ended September 30,2017 2016

Equity-classified compensation $8,571,430 $10,058,217Liability-classified compensation — 2,391,862

$8,571,430 $12,450,079

Performance-Based Stock Units

The Company has issued PSUs, which generally have a ten year life from the date of grant and vest 50%after the third anniversary from issuance and the remaining 50% on the fourth anniversary. The PSUs areexercisable upon the earlier of  (i) a change in control, (ii) consummation of an initial public offering, or(iii) a corporate valuation in excess of  $400 million. Upon exercise, the PSU holder receives commonstock or cash at the Company’s discretion.

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ONCOBIOLOGICS, INC.

Notes to Consolidated Financial Statements 

The following table summarizes the activity related to PSUs during the years ended September 30, 2017and 2016:

Number of

PSUs

Weighted-Average Base Price Per

PSU Balance at October 1, 2015 687,013 $ 3.45Forfeitures (4,924 4.85Exchanged for restricted stock units (434,780 3.45Balance at October 1, 2016 247,309 6.33Forfeitures (71,779 6.46Balance at September 30, 2017 175,530 $ 6.27

In December 2015, the Company completed a tender-offer to holders of outstanding PSUs to amend theterms of such outstanding awards to increase the base price to an amount equal to the fair market valueof a share of the Company’s common stock on the date of grant of the PSU, remove the right to be paiddividend equivalents and provide for settlement in shares of the Company’s common stock or cash, at theCompany’s discretion. Upon amending the settlement terms of the PSUs, the Company reclassified thestock-based compensation liability to additional paid-in capital.

Concurrent with the tender-offer, several PSU holders cancelled an aggregate of 434,780 PSUs inexchange for 391,303 RSUs. The Company accounted for the exchange as a modification, and, as aresult, recognized $98,172 of additional stock-based compensation during the year ended September 30,2016 based on the fair value of the RSUs in excess of the fair value of the PSUs exchanged.

The PSU represents an award that is exercisable based upon the achievement of either a performancecondition or a market condition. As a result, the Company measures and records compensation costtaking into consideration both conditions: (1) an award that becomes exercisable upon the Companyachieving a market value of  $400 million and at the discretion by the Company’s Board of Directors and(2) an award that is exercisable upon the earlier of a change in control or consummation of an IPO.Through December 2015, the fair value of both the performance and market conditions were remeasuredprior to the PSUs being reclassified into equity. However, given the discretionary action required to betaken by the Company’s Board of Directors, the fair value of the market condition continued to beremeasured each reporting period as compensation cost was recognized. Because a change of control oran IPO is not deemed probable until such event occurs, no compensation cost related to the performancecondition was recognized prior to the consummation of the Company’s IPO. Upon the consummation ofthe IPO in May 2016, the Company recorded compensation expense for the year ended September 30,2016 based upon the fair value of the performance condition of the PSUs which was established inDecember 2015 when the PSUs became equity classified.

The fair value of the PSUs of  $25.74 per PSU at December 31, 2015 was derived using the followingassumptions:

December 31, 2015

Risk-free interest rate 1.0%Derived service period 2.3 yearsExpected volatility 57.6%Annual dividend yield 0%Fair value of common stock $29.05 per share

As of September 30, 2017, there was $89,428 of unamortized expense that will be recognized over aweighted-average period of 1.1 years.

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13. Collaboration Arrangements

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ONCOBIOLOGICS, INC.

Notes to Consolidated Financial Statements 

Restricted Stock Units

The following table summarizes the activity related to RSUs during the years ended September 30, 2017and 2016:

Number of RSUs

Weighted Average

Grant Date Fair Value

Balance at October 1, 2015 — $ —Granted 705,311 28.31Forfeitures (2,263 13.78Issued in connection with PSU exchange 391,303 29.05Balance at October 1, 2016 1,094,351 28.61Granted 615,000 2.11Vested and settled (483,913 29.05Forfeitures (285,559 3.14Balance at September 30, 2017 939,879 $18.78

The Company has granted RSUs that generally vest over a period of two to four years from the date ofgrant. In addition, vesting of certain of the RSUs was also dependent upon the closing of the IPO, whichis a performance condition that is outside the Company’s control. Therefore, the Company did notrecognize any stock-based compensation until the consummation of the IPO in May 2016.

As of September 30, 2017, there was $4,265,887 of unamortized expense that will be recognized over aweighted-average period of 0.9 years.

Huahai Agreement

In May 2013, the Company entered into strategic license and collaboration arrangement with ZhejiangHuahai Pharmaceutical Co., Ltd (“Huahai”) under which the Company granted Huahai and its affiliates anexclusive license for the research, development, manufacture, use or sale of ONS-3010 or ONS-1045 inChina, including, the People’s Republic of China, Hong Kong, Macau and Taiwan. In addition, theCompany granted Huahai a right and license under the Selexis Technology agreement to establish aproduction process for the products in the agreed territory and to market the products in the agreedterritory pursuant to the relevant terms and conditions of the Company’s commercial license agreementwith Selexis.

Under the terms of the arrangement, the Company has received $7,500,000 in upfront payments andnon-substantive milestones and received $8,500,000 in substantive milestones. The Companydetermined that the deliverables under the Huahai arrangement were the exclusive license and theresearch and development services to be completed by the Company. Since the license did not havestandalone value, the upfront and non-substantive milestones payments received have been deferredand are being recognized ratably on a straight line basis through December 2021, the expected date inwhich the research and development will be completed. Substantive milestones received under theHuahai arrangement are recognized upon achievement.

During the years ended September 30, 2017 and 2016, the Company recognized $714,848 and$1,175,580 of deferred revenues, respectively. As of September 30, 2017 and 2016, deferred revenueincluded in the Company’s consolidated balance sheet related to the Huahai arrangement was$3,038,102 and $3,752,950, respectively.

)

))

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ONCOBIOLOGICS, INC.

Notes to Consolidated Financial Statements 

IPCA License and Collaboration Agreement

In August 2013, the Company entered into a strategic license agreement with IPCA Laboratories Limitedand its affiliates (“IPCA”) under which the Company granted IPCA a license for the research,development, manufacture, use or sale of the ONS-3010 and, by amendment in May 2014, the ONS-1045biosimilar product candidates with respect to India, Sri-Lanka, and Myanmar, and non-exclusive withrespect to Nepal and Bhutan, or collectively, the agreed territory. In addition, the Company granted IPCAa right and license under the Selexis Technology to enable IPCA to establish an exclusive productionprocess for the products in its agreed territory and to exclusively market the products in the agreedterritory. The Company also agreed not to amend or terminate its rights under its commercial licenseagreement with Selexis without IPCA’s prior written consent.

Pursuant to the agreement, the Company agreed to continue the non-clinical and clinical development ofeach of ONS-3010 and ONS-1045 and corresponding products around the world and to develop andcommercialize such products through Phase 3 clinical trials and regulatory approval in the United Statesand European Union. These obligations continue until termination of the agreement or the individualdevelopment programs or upon final regulatory approval of the last product for such biosimilars in theUnited States or European Union. The Company agreed to provide IPCA with a pre-IND package assubmitted to EMEA and FDA, as well as perform preclinical development and characterization of ONS-3010 and ONS-1045 so as to enable IPCA to file an IND to conduct clinical trials and to perform clinicaltrials.

Under the terms of the agreement, the Company has received upfront and non-substantive milestonepayments of  $2,400,000, and received $1,000,000 in regulatory milestone payments. In addition, theCompany is eligible to receive royalties at a low double-digit percentage rate of annual net sales ofproducts by IPCA and its affiliates in the agreed territory. For each of ONS-3010 and ONS-1045, IPCAagreed to fund a portion of the global costs associated with the Phase 3 clinical trials.

The Company determined that the deliverables under the IPCA arrangement were the exclusive licenseand the research and development services to be completed by the Company. Since the license did nothave standalone value, the upfront and non-substantive milestones payments received have beendeferred and are being recognized ratably on a straight line basis through December 2019, the expecteddate in which the research and development will be completed. Substantive milestone payments receivedunder the IPCA arrangement are recognized upon achievement. Cost reimbursements from IPCA relatedto the global costs associated with the Phase 3 clinical trials are recorded as a reduction in research anddevelopment expense.

During the years ended September 30, 2017 and 2016, the Company recognized deferred revenues of$261,072 and $421,732, respectively. As of September 30, 2017 and 2016, deferred revenue included inthe Company’s consolidated balance sheets was $1,109,558 and $1,370,630, respectively.

Liomont Agreement

In June 2014, the Company entered into a strategic license agreement with Liomont, under which theCompany granted Liomont and its affiliates an exclusive, sublicenseable license in Mexico for theresearch, development, manufacture, use or sale of the ONS-3010 and ONS-1045 biosimilar productcandidates in Mexico. In addition, the Company granted Liomont a non-exclusive right and license underthe Selexis Technology and related intellectual property to enable Liomont to distribute, market andcommercialize the products in Mexico. The Company also agreed not to amend or terminate its rightsunder the commercial agreement with Selexis without Liomont’s prior written consent.

Under the terms of the agreement, the Company has received upfront payments and non-substantivemilestone payments of  $2,000,000 and received $1,000,000 in regulatory milestone payments. Inaddition, the Company is eligible to receive up to $2,000,000 in future substantive milestone payments.For each of ONS-3010 and ONS-1045, Liomont agreed to fund a portion of the global costs for Phase 3clinical trials.

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14. Related-Party Transactions

15. Income Taxes

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ONCOBIOLOGICS, INC.

Notes to Consolidated Financial Statements 

The Company is eligible to receive tiered royalties at upper single-digit to low double-digit percentagerates of annual net sales of products by Liomont and its affiliates in Mexico.

The Company determined that the deliverables under the Liomont arrangement were the exclusivelicense and the research and development services to be completed by the Company. Since the licensedid not have standalone value, the upfront payments received have been deferred and are beingrecognized ratably on a straight line basis through December 2019, the expected date in which theresearch and development will be completed. Cost reimbursements from Liomont related to the globalcosts associated with the Phase 3 clinical trials are recorded as a reduction in research and developmentexpense.

During the years ended September 30, 2017 and 2016, the Company recognized deferred revenue of$236,641 and $382,264, respectively. As of September 30, 2017 and 2016, deferred revenue included inthe Company’s consolidated balance sheets was $1,005,724 and $1,242,365.

GMS Tenshi Agreement

In July 2017, the Company entered into a strategic licensing agreement with GMS Tenshi, under which itgranted GMS Tenshi and its affiliates a perpetual, irrevocable, exclusive, sublicensable license in theagreed territory for the research, development, manufacture, use or sale of the ONS-1045 biosimilarproduct candidate in the agreed territory. The agreed territory includes all emerging markets butspecifically excludes major developed markets, such as the United States, Canada, Europe, Japan,Australia and New Zealand, and smaller markets where the Company has existing licensingarrangements, such as Mexico, greater China and India. The Company received an initial upfrontpayment from GMS Tenshi of  $1.25 million, and an additional $1.25 million upon meeting a notice andacknowledgment milestone.

In September 2017 the Company and GMS Tenshi superseded and replaced the strategic licenseagreement with a Joint Development and License Agreement (the “JDLA”) providing for the developmentand commercialization of the Company’s ONS-3010 and ONS-1045 biosimilar product candidates in thesame geographic territories. In exchange for granting GMS Tenshi a perpetual, irrevocable, exclusive,sublicensable license in the agreed territory for the research, development, manufacture, use or sale ofthe ONS-3010 and ONS-1045 biosimilar product candidates in the agreed territory, GMS Tenshi made anadditional payment of  $2.5 million in connection with the JDLA.

The Company may receive up to an additional $2.5 million milestone payments under the JDLA for eachlicensed product upon achievement of certain net profit thresholds. The parties agreed to share net profitsbased on sales of licensed products in the agreed territory, in proportions weighed in GMS Tenshi’s favor,subject to adjustment as provided in the agreement.

During the year ended September 30, 2017, the Company recognized revenue of  $2,598,958 under theGMS Tenshi agreements. As of September 30, 2017, deferred revenue included in the Company’sconsolidated balance sheet was $2,401,042.

During the years ended September 30, 2017 and 2016, there were no related party transactions otherthan as previously disclosed for the Stockholder Notes (Note 7), Debt (Note 8) and the GMS TenshiAgreement (Note 13).

Income tax expense for the years ended September 30, 2017 and 2016 consists of the following:

Year Ended September 30,2017 2016

State tax $ 1,500 $ 3,000Foreign tax provision 500,000 100,000

$501,500 $103,000

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ONCOBIOLOGICS, INC.

Notes to Consolidated Financial Statements 

The Company incurred $0.5 million and $0.1 million of foreign withholding taxes in connection with theCompany’s collaboration and licensing agreements during the years ended September 30, 2017 and2016, respectively.

A reconciliation of income tax expense (benefit) at the statutory federal income tax rate and income taxesas reflected in the financial statements is as follows:

Year Ended September 30,2017 2016

U.S. federal statutory rate (34.0 (34.0State taxes, net of federal benefit (6.4 (5.9Foreign witholding tax 1.3 0.2Permanent differences (2.8 —Foreign tax credits (1.6 —Change in valuation allowance 44.8 40.0Other — (0.1

Effective income tax rate 1.3 0.2

The tax effects of the temporary differences that gave rise to deferred taxes were as follows:

September 30,2017 2016

Deferred tax assetsNet operating loss carryforwards $ 48,828,141 $ 36,146,789Stock compensation 14,098,985 11,249,314Deferred revenue 3,017,238 2,542,558Research and development credit carryforward 757,701 757,701Foreign tax credits 2,857,309 2,257,309Accruals and others 1,539,943 1,287,592

Gross deferred tax assets 71,099,317 54,241,263Less: valuation allowance (69,902,446 (52,737,104

1,196,871 1,504,159Deferred tax liability:

Fixed assets (1,196,871 (1,504,159Net deferred tax assets $ — $ —

As of September 30, 2017, the Company has approximately $131.5 million and $69.6 million of Federaland New Jersey net operating losses (“NOLs”) that will begin to expire in 2030 and 2036, respectively. Asof September 30, 2017, the Company has federal and state research and development (“R&D”) tax creditcarryforwards of  $0.8 million available to reduce future tax liabilities, which will begin to expire in 2031. Asof September 30, 2017, the Company has Federal foreign tax credit carryforwards of  $2.9 millionavailable to reduce future tax liabilities which will begin to expire starting in 2023. $2.4 million of theFederal foreign tax credit carryforward is included in the balance of unrecognized tax benefits. Realizationof the deferred tax asset is contingent on future taxable income and based upon the level of historicallosses, management has concluded that the deferred tax asset does not meet the more-likely-than-notthreshold for realizability. Accordingly, a full valuation allowance continues to be recorded against theCompany’s deferred tax assets as of September 30, 2017 and 2016. The valuation allowance increased$17.1 million and $14.1 million during the years ended September 30, 2017 and 2016, respectively.

When uncertain tax positions exist, the Company recognizes the tax benefit of tax positions to the extentthat the benefit will more likely-than-not be realized. The determination as to whether the tax benefit will

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16. Subsequent Events

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ONCOBIOLOGICS, INC.

Notes to Consolidated Financial Statements 

more-likely-than-not be realized is based upon the technical merits of the tax position as well asconsideration of the available facts and circumstances. The Company recognizes interest and penaltiesaccrued on any unrecognized tax benefits within the provision for income taxes in its consolidatedstatements of operations.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

Year Ended September 30,

2017 2016 Balance at beginning of year $1,854,629 $1,754,629Additions based on tax positions related to the current year 497,500 100,000Balance at end of year $2,352,129 $1,854,629

The Company does not anticipate material change in the unrecognized tax benefits in the next12 months. These unrecognized tax benefits, if recognized, would affect the annual effective tax rate. TheCompany’s income tax returns for the years from 2011 through 2016 remain open for examination by theInternal Revenue Service as well as various state, local and foreign jurisdictions.

Due to the change in ownership provisions of the Internal Revenue Code, the availability of theCompany’s NOL carryforwards may be subject to annual limitations against taxable income in futureperiods, which could substantially limit the eventual utilization of such carryforwards. The Company hasnot analyzed the historical or potential impact of its equity financings on beneficial ownership andtherefore no determination has been made whether the NOL carry forward is subject to any InternalRevenue Code Section 382 limitation. To the extent there is a limitation, there would be a reduction in thedeferred tax assets with an offsetting reduction in the valuation allowance.

On October 31, 2017, following receipt of the requisite stockholder approval under applicable NASDAQlisting rules and pursuant to the Purchase Agreement, the Company issued the remaining 217,372 sharesof Series A Convertible and the GMS Tenshi Warrants to GMS Tenshi for an aggregate purchase price of$21,737,200. The GMS Tenshi Warrants are exercisable into 16,750,000 shares of common stock at$0.90 per share and have a term of eight years. Concurrent therewith, and pursuant to the ExchangeAgreement, the Noteholders exchanged $1,500,000 in aggregate principal of Notes for 1,500,000 sharesof the Series B Convertible and forgave any accrued but unpaid interest thereon.

In November 2017, the Company received approval from the New Jersey Economic DevelopmentAuthority’s Technology Business Tax Certificate Transfer Program to sell a portion of its unused NewJersey NOLs and R&D tax credits. As a result, the Company received $3.15 million of cash from the saleof these NOLs and credits in December 2017.

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Item 9. Changes in and Disagreements with Accountants on Accounting and FinancialDisclosure

Item 9A. Controls and Procedures

Item 9B. Other Information

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None

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer,have evaluated our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)under the Securities Exchange Act of 1934, as amended) prior to the filing of this Annual Report on Form10-K. Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer, haveconcluded that, as of the end of the period covered by this Annual Report on Form 10-K, our disclosurecontrols and procedures were, in design and operation, effective as of September 30, 2017.

Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financialreporting, as such term is defined in Rule 13a-15(f) of the Exchange Act. Our internal control system isdesigned to provide reasonable assurance regarding the preparation and fair presentation of financialstatements for external purposes in accordance with generally accepted account principles. All internalcontrol systems, no matter how well designed, have inherent limitations and can provide only reasonableassurance that the objectives of the internal control system are met.

Under the supervision and with the participation of our management, including the Chief Executive Officerand the Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal controlover financial reporting, based on criteria established by the Committee of Sponsoring Organizations ofthe Treadway Commission (COSO) in its 2013 Internal Control-Integrated Framework. Based on ourevaluation, we concluded that our internal control over financial reporting was effective as ofSeptember 30, 2017.

As an emerging growth company, as defined under the Terms of the JOBS Act of 2012, the Company’sindependent registered accounting firm is not required to issue an attestation report on our internal controlover financial reporting.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter endedSeptember 30, 2017 that have materially affected, or are reasonably likely to materially affect, our internalcontrol over financial reporting.

Inherent Limitation on the Effectiveness of Internal Control.

The effectiveness of any system of internal control over financial reporting, including ours, is subject toinherent limitations, including the exercise of judgment in designing, implementing, operating, andevaluating the controls and procedures, and the inability to eliminate misconduct completely. Accordingly,any system of internal control over financial reporting, including ours, no matter how well designed andoperated, can only provide reasonable, not absolute assurances. In addition, projections of any evaluationof effectiveness to future periods are subject to the risk that controls may become inadequate because ofchanges in conditions, or that the degree of compliance with the policies or procedures may deteriorate.We intend to continue to monitor and upgrade our internal controls as necessary or appropriate for ourbusiness, but cannot assure you that such improvements will be sufficient to provide us with effectiveinternal control over financial reporting.

Not applicable.

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Item 10. Directors, Executive Officers and Corporate Governance

Item 11. Executive Compensation

Item 12. Security Ownership of Certain Beneficial Owners and Management and RelatedStockholder Matters

Item 13. Certain Relationships and Related Transactions, and Director Independence

Item 14. Principal Accounting Fees and Services

Item 15. Exhibits and Financial Statement Schedules

(2) The financial statement schedules required by Item 15(a) are omitted because they are notapplicable, not required or the required information is included in the financial statements ornotes thereto as filed in Item 8 of this Annual Report on Form 10-K.

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PART III

Certain information required by PART III is omitted from this Annual Report on From 10-K because theCompany will file a Definitive Proxy Statement with the Securities and Exchange Commission within120 days after the end of our year ended September 30, 2017.

The information required by this item is incorporated herein by reference to the Proxy Statement.

The information required by this item is incorporated herein by reference to the Proxy Statement.

The information required by this item is incorporated herein by reference to the Proxy Statement.

The information required by this item is incorporated herein by reference to the Proxy Statement.

The information required by this item is incorporated herein by reference to the Proxy Statement.

PART IV

(a) (1) The financial statements required by Item 15(a) are filed in Item 8 of this Annual Report on Form10-K.

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EXHIBITS

3.1 Amended and Restated Certificate of Incorporation of Oncobiologics, Inc. (incorporated byreference to Exhibit 3.1 to the Registrant’s current report on Form 8-K filed with the SEC onMay 19, 2016).

3.2 Amended and Restated Bylaws of Oncobiologics, Inc. (incorporated by reference to Exhibit 3.2to the Registrant’s current report on Form 8-K filed with the SEC on May 19, 2016).

3.3 Amendment to the Amended and Restated Bylaws of Oncobiologics, Inc. (incorporated byreference to Exhibit 3.1 to the Registrant’s current report on Form 8-K filed with the SEC onNovember 29, 2016).

3.4 Certificate of Designation of Series A Convertible Preferred Stock and of Series B ConvertiblePreferred Stock of Oncobiologics, Inc. (incorporated by reference to Exhibit 3.1 to theRegistrant’s current report on Form 8-K filed with the SEC on September 11, 2017).

10.1 Investors’ Rights Agreement by and among Oncobiologics, Inc. and certain of its stockholders,dated March 10, 2014, as amended (incorporated by reference to Exhibit 10.1 to theRegistrant’s registration statement on Form S-1 (File No. 333-209011) filed with the SEC onMay 11, 2016).

10.2# 2011 Stock Incentive Plan (incorporated by reference to Exhibit 10.2 to the Registrant’sregistration statement on Form S-1 (File No. 333-209011) filed with the SEC on January 15,2016).

10.3# Form of Amended and Restated Performance Stock Unit Agreement for 2011 Stock IncentivePlan (incorporated by reference to Exhibit 10.29 to the Registrant’s registration statement onForm S-1 (File No. 333-209011) filed with the SEC on April 27, 2016).

10.4# 2015 Equity Incentive Plan (incorporated by reference to Exhibit 10.3 to the Registrant’sregistration statement on Form S-1 (File No. 333-209011) filed with the SEC on January 15,2016).

10.5# Forms of agreements and award grant notices for 2015 Equity Incentive Plan (incorporated byreference to Exhibit 10.4 to the Registrant’s registration statement on Form S-1 (File No. 333-209011) filed with the SEC on January 15, 2016).

10.6# 2016 Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.5 to theRegistrant’s registration statement on Form S-1 (File No. 333-209011) filed with the SEC onFebruary 12, 2016).

10.7# Form of Indemnity Agreement, by and between Oncobiologics, Inc. and each of its directorsand executive officers (incorporated by reference to Exhibit 10.12 to the Registrant’sregistration statement on Form S-1 (File No. 333-209011) filed with the SEC on January 15,2016).

10.8† Research License Agreement by and between Oncobiologics, Inc. and Selexis SA, effectiveas of October 3, 2011, as amended by Amendment No. 1 dated as of October 9, 2014(incorporated by reference to Exhibit 10.13 to the Registrant’s registration statement on FormS-1 (File No. 333-209011) filed with the SEC on February 26, 2016).

10.9† ONS-3010 Commercial License Agreement by and between Oncobiologics, Inc. and SelexisSA effective as of April 11, 2013, as amended effective as of May 21, 2014 (incorporated byreference to Exhibit 10.14 to the Registrant’s registration statement on Form S-1 (File No.333-209011) filed with the SEC on January 15, 2016).

10.10† ONS-1045 Commercial License Agreement by and between Oncobiologics, Inc. and SelexisSA effective as of April 11, 2013, as amended effective as of May 21, 2014 (incorporated byreference to Exhibit 10.15 to the Registrant’s registration statement on Form S-1 (File No.333-209011) filed with the SEC on January 15, 2016).

10.11† ONS-1050 Commercial License Agreement by and between Oncobiologics, Inc. and SelexisSA effective as of April 11, 2013, as amended effective as of May 21, 2014 (incorporated byreference to Exhibit 10.16 to the Registrant’s registration statement on Form S-1 (File No.333-209011) filed with the SEC on January 15, 2016).

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10.12 Joint Participation Agreement by and between Oncobiologics, Inc. and Zhejiang HuahaiPharmaceutical Co., Ltd., effective as of May 6, 2013, as amended by that Amendment No. 1and Mutual Termination Agreement re: Joint Participation Agreement, dated December 23,2014 (incorporated by reference to Exhibit 10.17 to the Registrant’s registration statement onForm S-1 (File No. 333-209011) filed with the SEC on January 15, 2016).

10.13 Lease Agreement by and between Oncobiologics, Inc. and Cedar Brook 7 Corporate Center,LP, dated as of March 18, 2011 (incorporated by reference to Exhibit 10.18 to the Registrant’sregistration statement on Form S-1 (File No. 333-209011) filed with the SEC on January 15,2016).

10.14 First Amendment to Lease Agreement by and between Oncobiologics, Inc. and Cedar Brook 7Corporate Center, LP, dated as of December 2013 (incorporated by reference to Exhibit 10.19to the Registrant’s registration statement on Form S-1 (File No. 333-209011) filed with theSEC on January 15, 2016).

10.15 Second Amendment to Lease Agreement by and between Oncobiologics, Inc. and CedarBrook 7 Corporate Center, LP, dated as of July 18, 2014 (incorporated by reference toExhibit 10.20 to the Registrant’s registration statement on Form S-1 (File No. 333-209011)filed with the SEC on January 15, 2016).

10.16 Third Amendment to Lease Agreement by and between Oncobiologics, Inc. and Cedar Brook7 Corporate Center, LP, dated as of January 16, 2015 (incorporated by reference toExhibit 10.21 to the Registrant’s registration statement on Form S-1 (File No. 333-209011)filed with the SEC on January 15, 2016).

10.17 Fourth Amendment to Lease Agreement by and between Oncobiologics, Inc. and Cedar Brook7 Corporate Center, LP, dated as of February 9, 2015 (incorporated by reference toExhibit 10.22 to the Registrant’s registration statement on Form S-1 (File No. 333-209011)filed with the SEC on January 15, 2016).

10.18 Fifth Amendment to Lease Agreement by and between Oncobiologics, Inc. and Cedar Brook 7Corporate Center, LP, dated as of September 26, 2015 (incorporated by reference toExhibit 10.23 to the Registrant’s registration statement on Form S-1 (File No. 333-209011)filed with the SEC on January 15, 2016).

10.19 Lease Agreement by and between Cedar Brook East Corporate Center, LP andOncobiologics, Inc., dated as of August 31, 2015 (incorporated by reference to Exhibit 10.24 tothe Registrant’s registration statement on Form S-1 (File No. 333-209011) filed with the SECon January 15, 2016).

10.20# Employment Agreement between Oncobiologics, Inc. and Pankaj Mohan, Ph.D., datedFebruary 22, 2016 (incorporated by reference to Exhibit 10.25 to the Registrant’s registrationstatement on Form S-1 (File No. 333-209011) filed with the SEC on April 27, 2016).

10.21# Employment Agreement between Oncobiologics, Inc. and Lawrence A. Kenyon, datedFebruary 18, 2016 (incorporated by reference to Exhibit 10.28 to the Registrant’s registrationstatement on Form S-1 (File No. 333-209011) filed with the SEC on April 27, 2016).

10.22# Employment Agreement between Oncobiologics, Inc. and Kenneth Bahrt, M.D., datedFebruary 22, 2016 (incorporated by reference to Exhibit 10.26 to the Registrant’s registrationstatement on Form S-1 (File No. 333-209011) filed with the SEC on April 27, 2016).

10.23# Employment Agreement between Oncobiologics, Inc. and Elizabeth A. Yamashita, datedFebruary 24, 2016 (incorporated by reference to Exhibit 10.27 to the Registrant’s registrationstatement on Form S-1 (File No. 333-209011) filed with the SEC on April 27, 2016).

10.24# Form of Amended and Restated Performance Stock Unit Agreement for 2011 Stock IncentivePlan (incorporated by reference to Exhibit 10.29 to the Registrant’s registration statement onForm S-1 (File No. 333-209011) filed with the SEC on April 27, 2016).

10.25 Form of Warrant to Purchase Common Stock (incorporated by reference to Exhibit 10.30 to theRegistrant’s registration statement on Form S-1 (File No. 333-209011) filed with the SEC onMay 11, 2016).

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10.26 Securities Purchase Agreement between Oncobiologics, Inc. and Sabby Healthcare MasterFund Ltd., dated May 11, 2016 (incorporated by reference to Exhibit 10.1 to the Registrant’scurrent report on Form 8-K filed with the SEC on May 19, 2016).

10.27 Warrant Agreement by and between Oncobiologics, Inc. and American Stock Transfer & TrustCompany LLC, as Warrant Agent dated May 18, 2016 (incorporated by reference toExhibit 10.4 to the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on June 27,2016).

10.28 Amendment to the Warrant Agreement dated May 18, 2016 by and Oncobiologics, Inc. andAmerican Stock Transfer & Trust Company LLC, as Warrant Agent, dated February 6, 2017(incorporated by reference to Exhibit 10.1 to the Registrant’s current report on Form 8-K filedwith the SEC on February 6, 2017).

10.29 Form of Series A warrant certificate (included in Exhibit 10.27).10.30 Form of Series B warrant certificate (included in Exhibit 10.27).10.31 Note and Warrant Purchase Agreement by and between Oncobiologics, Inc. and the

Purchasers named therein dated December 22, 2016 (incorporated by reference toExhibit 10.1 to the Registrant’s current report on Form 8-K filed with the SEC on December 23,2016).

10.32 First Amendment to Note and Warrant Purchase Agreement by and among Oncobiologics, Inc.and the Noteholders named therein, dated April 13, 2017 (incorporated by reference toExhibit 10.1 to the Registrant’s current report on Form 8-K filed with the SEC on April 17,2017).

10.33 Note, Warrant and Registration Rights Amendment and Waiver, dated September 7, 2017(incorporated by reference to Exhibit 10.9 to the Registrant’s current report on Form 8-K filedwith the SEC on September 11, 2017).

10.34 Form of Senior Secured Promissory Note (included as Exhibit A to the Note and WarrantPurchase Agreement filed as Exhibit 10.30).

10.35 Form of Warrant (included as Exhibit B to the Note and Warrant Purchase Agreement filed asExhibit 10.30).

10.36 Security Agreement by and between Oncobiologics, Inc. and the Secured Parties namedtherein dated December 22, 2016 (incorporated by reference to Exhibit 10.4 to the Registrant’scurrent report on Form 8-K filed with the SEC on December 23, 2016).

10.37 Intellectual Property Security Agreement by and between Oncobiologics, Inc. and the SecuredParties named therein dated December 22, 2016 (incorporated by reference to Exhibit 10.5 tothe Registrant’s current report on Form 8-K filed with the SEC on December 23, 2016).

10.38 Registration Rights Agreement by and among Oncobiologics, Inc. and the Investors namedtherein, dated February 3, 2017 (incorporated by reference to Exhibit 10.1 to the Registrant’scurrent report on Form 8-K filed with the SEC on February 3, 2017).

10.39 Purchase Agreement by and between Oncobiologics, Inc. and Lincoln Park Capital Fund, LLC,dated March 8, 2017 (incorporated by reference to Exhibit 10.1 to the Registrant’s currentreport on Form 8-K filed with the SEC on March 9, 2017).

10.40 Registration Rights Agreement by and between Oncobiologics, Inc. and Lincoln Park CapitalFund, LLC, dated March 8, 2017 (incorporated by reference to Exhibit 10.2 to the Registrant’scurrent report on Form 8-K filed with the SEC on March 9, 2017).

10.41 Purchase Agreement by and between Oncobiologics, Inc. and the Investor named therein,dated September 7, 2017 (incorporated by reference to Exhibit 10.1 to the Registrant’s currentreport on Form 8-K filed with the SEC on September 11, 2017).

10.42 Form of Warrant to Purchase Common Stock of Oncobiologics, Inc. (incorporated by referenceto Exhibit 4.1 to the Registrant’s current report on Form 8-K filed with the SEC onSeptember 11, 2017).

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† Portions of this exhibit (indicated by asterisks) have been omitted pursuant to a request forconfidential treatment and this exhibit has been filed separately with the SEC.

* Furnished herewith and not deemed to be “filed” for purposes of Section 18 of the SecuritiesExchange Act of 1934, as amended, and shall not be deemed to be incorporated by reference intoany filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, asamended.

# Indicates management contract or compensatory plan.

Item 16. Form 10-K Summary

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10.43 Purchase and Exchange Agreement by and between Oncobiologics, Inc. and the Noteholdersnamed therein, dated September 7, 2017 (incorporated by reference to Exhibit 10.2 to theRegistrant’s current report on Form 8-K filed with the SEC on September 11, 2017).

10.44 Investor Rights Agreement by and between Oncobiologics, Inc. and the Investor namedtherein, dated September 7, 2017 (incorporated by reference to Exhibit 10.3 to theRegistrant’s current report on Form 8-K filed with the SEC on September 11, 2017).

10.45 Form of Voting and Lock-up Agreement by and between the Investor named therein and thedirector or Executive Officer of Oncobiologics, Inc. party thereto, dated September 7, 2017(incorporated by reference to Exhibit 10.4 to the Registrant’s current report on Form 8-K filedwith the SEC on September 11, 2017).

10.46 Voting and Lock-up Agreement by and between the Investor named therein and Todd C.Brady, Director Oncobiologics, Inc., dated September 7, 2017 (incorporated by reference toExhibit 10.5 to the Registrant’s current report on Form 8-K filed with the SEC onSeptember 11, 2017).

10.47 Form of Voting and Lock-up Agreement by and between the Investor named therein and theStockholder of Oncobiologics, Inc. party thereto, dated September 7, 2017 (incorporated byreference to Exhibit 10.6 to the Registrant’s current report on Form 8-K filed with the SEC onSeptember 11, 2017).

10.48 Form of Voting and Lock-up Agreement by and between the Investor named therein and theNoteholder named therein, dated September 7, 2017 (incorporated by reference toExhibit 10.7 to the Registrant’s current report on Form 8-K filed with the SEC onSeptember 11, 2017).

10.49 Lock-up Agreement by and between the Investor named therein and Pankaj Mohan, Ph.D.,dated September 7, 2017 (incorporated by reference to Exhibit 10.8 to the Registrant’s currentreport on Form 8-K filed with the SEC on September 11, 2017).

23.1 Consent of independent registered public accounting firm.31.1 Certification of Principal Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a)

promulgated under the Securities Exchange Act of 1934, as amended.31.2 Certification of Principal Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a)

promulgated under the Securities Exchange Act of 1934, as amended.32.1* Certifications of Principal Executive Officer and Principal Financial Officer pursuant to 18

U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.101.INS XBRL Instance Document101.SCH XBRL Taxonomy Extension Schema Document101.CAL XBRL Taxonomy Extension Calculation Linkbase Document101.DEF XBRL Definition Linkbase Document101.LAB XBRL Taxonomy Extension Labels Linkbase Document101.PRE XBRL Taxonomy Extension Presentation Linkbase Document

None.

Page 133: TABLE OF CONTENTS · ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities ITEM 6. Selected Financial Data ITEM 7.

TABLE OF CONTENTS

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) the Securities Exchange Act of 1934, the registranthas duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto dulyauthorized.

Date: December 29, 2017 By: /s/ Pankaj Mohan

Name: Pankaj Mohan, Ph.D.Title: Chairman, President and Chief Executive Officer

(Principal Executive Officer)

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-Khas been signed below by the following persons on behalf of the registrant and in the capacities and onthe dates indicated.

/s/ Pankaj Mohan

Pankaj Mohan, Ph.D.

Chairman, President and Chief ExecutiveOfficer

(Principal Executive Officer)

December 29, 2017

/s/ Lawrence A. Kenyon

Lawrence A. Kenyon

Chief Financial Officer and Secretary

(Principal Financial and Accounting Officer)

December 29, 2017

/s/ Claudio Albrecht

Claudio Albrecht

Director

December 29, 2017

/s/ Scott Canute

Scott Canute

Director

December 29, 2017

/s/ Yezan Haddadin

Yezan Haddadin

Director

December 29, 2017

/s/ Kurt J. Hilzinger

Kurt J. Hilzinger

Director

December 29, 2017

/s/ Joe Thomas

Joe Thomas

Director

December 29, 2017

/s/ Faisal G. Sukhtian

Faisal G. Sukhtian

Director

December 29, 2017